The dry spell caused by El Niño poses an additional risk to coffee production in Indonesia, which holds the position of the world’s fourth-largest coffee producer. This threat comes on the heels of a significant decline in output due to excessive rainfall, resulting in the lowest production levels in over ten years. Consequently, this has led to unprecedented global price increases within the coffee market.
The decreased coffee yield in Indonesia, where the predominant production is of robusta beans known for their stronger and more pronounced bitter taste compared to the arabica variety, has the potential to stimulate further price increases. These price hikes have already surged by over 40% in the year 2023 and reached an all-time peak in June.
“There are forecasts of El Nino weather leading to dryness towards the end of the year and early next year in Indonesia,” said Carlos Mera, head of agri commodities markets research at Rabobank.
“If there is dryness, Indonesia’s coffee production could fall further in 2024/25.”
The Indonesian meteorological agency (BMKG) has reported that the El Niño weather phenomenon, known for bringing extended periods of hot and dry conditions to the tropical nation, is currently impacting over two-thirds of the country. This includes Java and specific regions of Sumatra, both of which are vital coffee-producing zones.
The arid circumstances stand in stark contrast to the abundant rainfall experienced by the Southeast Asian nation from 2020 to 2022, attributed to the La Niña phenomenon. Additionally, substantial precipitation has also been observed during the initial five months of the current year.
According to data from the U.S. Department of Agriculture, Indonesia’s coffee production for the 2023/24 period is projected to reach 9.7 million 60-kg bags. This represents a decline from the previous year’s output of 11.85 million bags and marks the lowest production level since the 2011/12 season.
The plantations located in Sumatra and Java are anticipated to experience the greatest impact of any potential drought. Meteorologists are predicting that the El Niño phenomenon will likely become more intense towards the latter part of 2023 and the beginning of the following year. This period is crucial for flowering and the development of fruits in the coffee plants.
The majority of coffee plantations in Indonesia rely on rainfall for irrigation. The risk of dry conditions comes after a period of increased rainfall in recent months across Sumatra and Java, which led to a decrease in coffee production.
“This year my harvest is only 30% compared to last year due to too much rain, causing coffee flowers to drop off early,” said Peratin Buchori, a 55-year-old farmer in Lampung, on the southern tip of Sumatra island, known for its robusta beans.
Excessive rainfall during the flowering phase can result in the premature shedding of blossoms prior to the formation of berries, ultimately causing a reduction in overall yields.
“Coffee supply is very thin. I personally say it is down around 25% compared to last year,” one Lampung-based coffee trader told Reuters, adding that the decreased supply has created panic buying in the past months.
In Indonesia, coffee production typically varies between 0.7 and 1.0 metric tons per hectare, whereas Vietnam, the largest global provider of robusta beans, achieves an output of 2.7 tons per hectare.
Nearly the entirety of Indonesia’s approximately 1.25 million hectares of coffee plantations are managed by smallholder farmers. These farmers employ traditional cultivation techniques and utilize restricted amounts of fertilizers. A significant portion of the coffee trees is aged, with certain trees having been planted over twenty years ago.
The authorities have been actively encouraging farmers to engage in tree replanting efforts. This includes initiatives such as distributing coffee seedlings, offering subsidized fertilizers, and extending affordable loan opportunities.
Nonetheless, official data indicates that a mere 2% of the complete coffee plantation area has undergone replanting since 2018.
“Our farmers often lack focus; they plant various commodities on their land, not just coffee,” Muhammad Rizal, director of annual and perennial crops at the agriculture ministry told Reuters.
“They are also lacking in the knowledge of good agricultural practices.”
The ministry is contemplating a fresh program that aims to involve corporate buyers in the process of training growers in optimal practices. These buyers would also serve as off-takers, as mentioned by Rizal. He drew a comparison to the country’s emerging plasma farmer scheme, which has been implemented for Indonesia’s primary commodity, palm oil.