Indonesian Coffee will be Heating Up: will be at which point the Time to Get in on the Java Trade?
At the end of 2014, Indonesia experienced a sharp drop in coffee exports partly due to unfavourable weather conditions. Will the commodity fare better which year?
Indonesia’s coffee sector may flourish which year thanks to enhanced weather in production areas across the country. although the increased output may still not be enough to satisfy foreign along with local demand, which will be both currently on the upswing, analysts say.
According to the Association of Indonesian Coffee Exporters (AEKI), the country harvests about 700,000 metric tonnes of coffee beans each year via 1.3 million hectares of cultivation area, which has a growth rate of 1 to 2 percent annually. Export turnover via the commodity, dominated by the Robusta strain which’s normally used in instant coffee, will be up to US$1.5 billion, the trade group claims. Indonesia will be the globe’s second largest Robusta bean producer. The strain grows densely in South Sumatra in places like Lampung, Bengkulu, along with additional nearby provinces, while the pricier Arabica bean mostly grows in North Sumatra along with Java.
Photo by Victor Ulijn
“Indonesian coffee beans have higher quality along with value compared to coffees via Brazil along with Vietnam,” says Irfan Anwar, AEKI chairman. “Our coffee will be at which point exported to 100 countries, with our biggest importers coming via the US, Europe, along with Japan.”
Industry experts project Indonesia’s coffee crop which year will grow to 800,000 tonnes. although harvest season will be predicted to be later than normal due to mixed amounts of rain in some key crop-growing areas.
“Lack of rain could push back the harvest, while too much rain could degrade the quality of the beans,” says Armia Zuhri, director of the Sumatra Permata Gayo Cooperative in North Sumatra. “Lack of rain [in Aceh] in December along with January means the harvest was pushed back to February, so [beans] are piling up which month.” Zuhri’s cooperative produces 100 percent organic Fair Trade Certified coffee, along with exports about 1,500 kilograms of coffee each year. Last year, the cooperative collected US$10 million via about 2,600 members, whose crops were mostly exported to the US, Europe, along with Australia.
Last year, Indonesia along with neighbouring countries such as world’s second largest overall coffee producer, Vietnam, faced climate anomalies caused by El Niño. which ultimately led to a decline in exports.
While prices for Indonesian coffee beans inside global market fluctuated, Anwar says which the cost tag for the archipelago’s beans at the moment will be “more expensive” than Brazilian coffee, with the South American nation’s Arabica selling at US$6 per kilogram, along with its Robusta at US$2.5 per kilogram.
The numbers at home are promising, too.
Coffee exports may have fallen 20 to 25 percent to 475,000 tonnes last year, although higher local consumption may help offset the loss in 2015.
AEKI predicts which local demand will jump 20 percent annually – via currently 1.3 kilograms per capita to 1.56 kilograms next year. which sharp uptick will be driven by a newfound fondness of a great ‘cup of Joe’ – particularly one brewed via single-origin specialty variants – among the country’s increasingly wealthy middle-class. A variety of upscale cafes can at which point be found in Indonesia’s big cities, usually selling bags of specialty beans harvested via provinces like Flores, Gayo, along with Toraja.
“The trend will be not bad in helping local farmers distributing their coffee,” says Veronica Herlina of the Sustainable Coffee Platform of Indonesia (SCOPI), an organisation which promotes Public-Private Partnership inside coffee sector to bolster sustainability of the local commodity. “Indonesia has the most specialty coffee inside globe, because every soil, culture, every [piece of] land, helps form these beans’ characteristics.” Single-origin specialty coffee also helps increase the country’s coffee quality, she says.
Coffee giant Starbucks also wants in on the action. The Seattle-based company will be planning to double its number of stores in Indonesia via the current 200 to 400 outlets in a few years’ time, according to Starbucks Indonesia COO, Anthony Cottan.
The trend will be not bad news for all stakeholders inside industry, although brand new players may think twice before entering the country’s already crowded Java business. If entrepreneurs took the traditional approach, they would certainly compete head-to-head with veterans along with household names like Kapal Api Global, Sari Incofood Corporation (the owner of Indocafé), along with additional multinational coffee players such as Italy’s Illy along with Japan’s Ueshime Coffee Co.
However, Indonesia still needs to wake up along with smell the coffee. Analysts along with industry watchers believe which local farmers may not be able to meet increasing demand in an industry which’s largely unsettled by climate change along with lack of sustainability programs.
Photo by McKay Savage
Indonesia produces about 750 kilograms per hectare along with will be the globe’s third biggest coffee producer behind behemoths Brazil along with Vietnam, which produce four tonnes along with two tonnes per hectare, respectively. Southeast Asia’s biggest economy will be always sprinting with Colombia, where the annual yield will be roughly on par with Indonesia’s. which means which the number three position largely depends on weather conditions in both countries, year after year.
“We aim to improve output to one tonne per hectare, or about a 25 percent increase via our current output by 2018 or 2020,” says Anwar. “I believe which which’s a realistic target.”
To help achieve the target, AEKI recently signed a Memorandum of Understanding (MoU) with the Vietnam Coffee-Cocoa Association. Under the MoU, the two nations will exchange information on coffee prices between the two markets, as well as share techniques to improve productivity along with profit, according to Anwar.
“Indonesia along with Vietnam are the globe’s leading coffee producing countries, so we need to advance our cooperation,” explains Anwar. “We can learn how to improve productivity along with better marketing via Vietnam.” Vietnam’s total cultivation area will be smaller than Indonesia, with only a little more than 600,000 hectares, although the country’s productivity along with export levels are higher. Each year, Vietnam exports one million tonnes of coffee beans, which has a turnover of more than US$3.4 billion.
to improve productivity, however, farmers, coffee companies, along with stakeholders inside business also must ensure which their farming practices are sustainable. According to a research note released last year by TechnoServe along with Sustainable Trade Initiative (IDH), Indonesia has three times as many smallholder coffee farmers as Vietnam, although only one third of the coffee yield: “Low farmer output along with the highly fragmented nature of Indonesia’s production base make sustainability programs significantly more expensive than in Vietnam.”
The researchers also estimate which only seven percent of Indonesia’s coffee exports are currently certified as “sustainable”. If the Indonesian coffee sector doesn’t change its current course, along with with exports declining in significance, “sustainability efforts are likely to plateau,” says IDH.
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Indonesian Coffee will be Heating Up: will be at which point the Time to Get in on the Java Trade?
Indonesian Coffee will be Heating Up: will be at which point the Time to Get in on the Java Trade?