Report Highlights:
As a result of continued low prices, growing production costs, and declining productivity, Indonesia's coffee production is forecast to continue falling through 2004/05. Given the expectations for lower domestic supplies, exports are forecast to decline as well. The low returns have discouraged investment and expansion in Indonesia's coffee sector, and prospects for any rebound remain dim. One bright area has been in production of specialty coffees, which obtain a premium on the international market. However, these niche market type coffees comprise a small proportion of Indonesia's total production.
SECTION I – SITUATION AND OUTLOOK
Production
Low returns, and in some areas political instability, continue to discourage new investment and improved management practices.While area expansion has occurred in some areas, this has been negated by reductions in others.As a result, 2003/04 and 2004/05 area is forecast to remain at 1 million Ha.Furthermore, low profitability continues to inhibit advances in plantation management, and quality and yield improvement remains low.For the last three marketing years yields have remained constant to falling, and no evidence suggests yields will rebound in the future.As a result, production is forecast to fall to 360,000 tons(6,000 tbags) and 345,000 tons (5,750 tbags) in 2003/04 and 2004/05, respectively.
While in general area and production are falling, efforts are being made to expand in certain areas and to focus on certain types of coffee.Exports of specialty coffees are reportedly growing, particularly where producers have contract arrangements with overseas branded retailers.Several areas have been accredited to produce organic coffee.In addition, advances are being made in one of the most important coffee-producing provinces (Lampung), where the extension service and the Indonesian Coffee Exporters Association (AEKI) have successfully improved yields.
To enhance the viability of the sector, attention is being paid to increasing Arabica area, which currently accounts for only 15 percent of total area and approximately 11 percent of total production.While the goal is for Arabica to reach 30 percent of total area, several factors have hamper Arabica expansion, including limited suitable area at high elevations.