El Nino continues to haunt troubled RI coffee growers
By Sylvia Gratia MN
JAKARTA (JP): A blistering drought, believed to have been triggered by an El Nino weather pattern continues to haunt Indonesia's coffee growers.
Indonesia's coffee crop for the 1997/1998 coffee year, from Oct. 1, 1997, to Sept. 30, 1998, was partially destroyed, allowing the country to produce only 410,000 metric tons, 40,000 tons below its normal annual output of 450,000 tons.
The effect of this weather phenomenon will likely continue to affect Indonesia's coffee crop in the 1998/1999 coffee year.
Association of Indonesian Coffee Exporters' (AICE) Executive Secretary M. Noer Madjid told The Jakarta Post that the country's coffee output would continue to decline slightly in 1998/1999 because of the continuing effect of El Nino, exacerbated by its sister La Nina, a reverse weather pattern which brings higher- than-normal rainfalls.
"In 1997, we were assaulted by El Nino, and right now we are hit by La Nia, albeit its effect will not as drastic as El Nino's," Noer said.
Heavy rains, which have fallen since September, have affected coffee crops in South Sumatra, Lampung and Bengkulu, which together account for 65 percent of the country's production.
El Nino, named by Peruvian fishermen after the Christ child, describes the unusually warm Pacific Ocean temperatures which occur every two years to seven years unleashing natural disasters around the world, damaging crops for two successive years and causing turmoil in the world commodities market.
During El Nino's cycle last year, Indonesia experienced its most severe drought in 50 years. Forest fires burned uncontrolled in Sumatra and Kalimantan, and the country's agricultural and crop production was seriously affected.
Its sister, La Nina (little sister), arises from unusually cool temperatures in the Pacific Ocean and often follows the drought-inducing El Nino weather pattern. Its arrival brings the threat of floods, violent tropical storms and landslides.
AICE secretary for research and development Miftakhul Kirom said that the prolonged drought, since September last year, has destroyed coffee flowers in Indonesia's coffee belt and caused a lower output in 1997/1998 and will again cause lower output in 1998/1999.
This year's decline will be due to the excessive rains and strong winds, since September, which will hit coffee flowers, mostly in the area south of the equator, he said.
Indonesia is the world's third-largest coffee producer after Brazil and Colombia, with an output of 420,000 tons in 1997/1998. The country's production is 90 percent robusta and 10 percent arabica.
Robusta, extensively used in the instant coffee industry, is more bitter in taste than the higher grade arabica, which is predominantly grown in Central America, South America, East Africa and India.
Indonesia's main robusta-producing areas are South Sumatra, Lampung and Bengkulu. The three Sumatran provinces -- which traders call Indonesia's coffee triangle -- produce up to 70 percent of Indonesia's total production of coffee.
The country's arabica is produced in Aceh; North Tapanuli, North Sumatra; Toraja, South Sulawesi; and by state-owned coffee plantations in East Java and Central Java.
Noer said 1999/2000 coffee production will be bright due to the wet weather conditions.
"La Nina may have a bad effect on this year's (1998/1999) coffee harvest but the wet conditions it will cause next year will bring comfortable weather for the 1999/2000 coffee harvest as it will help coffee flowers to bloom," he said.
Exports
As coffee production continues to plunge, so does its exports, Noer said.
He said that the decline in production has led to a 15 percent decline in export volumes to around 330,000 tons this coffee year, or about 7 percent of the world's demand, from 381,512 tons recorded in 1996/1997.
"As of the beginning of September, 1998, Indonesia's coffee exports only reach 321,024 tons. So, we expect that the figure will reach 330,000 by the end of the 1997/1998 coffee year," Noer said.
Following an acute depreciation of the rupiah against the U.S. dollar, coffee producers prefer exporting their products. But the expected windfall was hampered by lower domestic production.
Kirom said that in 1997/1998, the Association of Coffee Producing Countries gave Indonesia an export quota of 350,000 tons a year.
However, the export quota could not be met because production continued to decline.
Noer said the U.S. Department of Agriculture (USDA) estimated Indonesia's coffee production could fall to 6.6 million 60-kilogram bags (396,000 tons), in the 1998/1999 coffee year, down 6 percent from 1997/1998.
The USDA also estimated that the country's coffee exports could drop to 4.6 million 60-kilogram bags (270,000 tons), in 1998/1999.
The country exports its robusta to the U.S., Japan, Germany, Singapore, the United Kingdom and several other European countries. Its high-grade coffee is exported to Japan and to the U.S.
Japan is Indonesia's largest coffee export-destination country in Asia, as is Germany in Europe.
The USDA also estimated that domestic coffee consumption in Indonesia for 1998/1999 was forecast to be 120,000 tons, compared to 126,000 tons in 1997/1998.
The USDA said the decline in consumption was due to a weakening purchasing of Indonesian consumers, caused by the prolonged economic crisis.
Noer said Indonesia normally produced between 450,000 tons and 500,000 tons of coffee per annum, of which 120,000 tons went to domestic consumption.
"But in a situation like this, when the purchasing power of most people is decreasing, domestic coffee consumption is likely to drop to 90,000 tons."
Prices
Noer said world market coffee prices depend on Brazil's coffee output.
"If Brazil's production is only 34 million bags (2.04 million tons) in 1998/1999, prices will drop. But the USDA has predicted that Brazil coffee output could reach 35.8 million bags in 1998/1999 due to favorable weather," he said.
He said the USDA predicted Brazil could export 23.3 million bags (1.39 million tons) of coffee beans this coffee year.
Brazil produced over 23.5 million bags (1.4 million tons) of coffee in 1997/1998, followed by Colombia with 800,000 tons.
He said coffee prices in the local market were also kept high by the sharp decline of the rupiah's value against the dollar.
"The rupiah's fluctuation will continue to be a price mover in Indonesia's local coffee market throughout 1999," he said.
The rupiah, like other Southeast Asian currencies, has been hit by speculative attacks since early July, last year losing more than 50 percent of its value against the greenback.
Kirom said the price of grade-four robusta peaked to over Rp 15,000 per kilogram in Lampung in May, when the rupiah nosedived to Rp 17,000 per dollar.
Last December, it hovered at Rp 7,500 per kg, when the rupiah was quoted at Rp 5,600 against the dollar.
He said farmers got a windfall from the rupiah's depreciation while exporters faced difficulties due to an increase in the price of beans, transportation, warehouse costs, high interest rates and fierce competition.
The high lending rates imposed by the government on farming activities have been a burden to increasing coffee exports.
"For example, lending rates imposed by the Vietnam government on farming-related activities is only 6 percent, compared to more than 40 percent in Indonesia," he said.
Noer said coffee was currently the third-largest foreign exchange earner among plantation commodities after rubber and palm oil, contributing 22 percent of the agricultural export value, and 1.66 percent of total export earnings.
Noer said that Vietnamese coffee is still the biggest threat to Indonesian coffee.
"This (coffee) year, Vietnamese coffee exports are expected to increase again partly due to the full support of Vietnamese government," he said.
The USDA estimated that Vietnam's coffee production during 1998/1999 will be 5.8 million bags (348,000 tons).
Vietnam's coffee exports during the year are forecast to be 5.8 million bags (348,000 tons), an increase of 5 percent over 330,000 tons in 1997/1998.
Table: Indonesia's coffee exports, coffee years from 1985/1986 to 1997/1998.
Coffee year* Volume (tons) Value (US$)-----------------------------------------
1985/1986 303,835 779,536
1986/1987 297,314 629,945
1987/1988 271,019 521,555
1988/1989 377,889 576,223
1989/1990 403,360 356,590
1990/1991 336,928 320,784
1991/1992 267,459 246,267
1992/1993 356,565 335,834
1993/1994 301,844 670,614
1994/1995 188,572 555,790
1995/1996 367,201 704,674
1996/1997 381,512 638,120
1997/1998** 321,024 576,352
Source: AICE
* Coffee year starting Oct. 1 until Sep. 30.
** As of September 1998.