Steep Decline Predicted For Indonesian Coffee Harvests

Last October, analysts predicted that coffee production in Indonesia would fall by ten per cent. However, those same industry figures have revised their estimations downward.

The most recent projections display that many are now expecting a drop of around twenty percent, the result of the strongest and most disruptive El Nino weather pattern to hit Southeast Asia in the past two decades.

The upcoming harvest may only bring in 560,000 metric tons of coffee, compared to 700,000 tons this year.

Speaking on the data (that was originally published by Bloomberg), the U.S Department of Agriculture said that this forecasted drop would be the ‘steepest decline’ that the Indonesian coffee industry has seen since 2006-07.

“Dryness in Indonesia is textbook El Nino,” said the commodities analyst Carlos Mera Arzeno. Arzeno, who works for Rabobank, echoed estimations of a twenty percent decline in production and, in some way, admitted it could turn out worse than many people fear.

Plantations and farms at altitude, so far, have escaped the worst of the weather. Nevertheless, crops in lower lying areas, such as those in the key regions of Lampung, Sumatra and Java, are facing devastation and extensive damage by the prolonged drought that has blanketed the area.

A substantial decrease of coffee from Indonesia reaching the export market could have a positive effect on pricing, however.

“We expect robusta prices to go up to above $1,580 a ton by mid-2016, as a double-whammy of a lower robusta crop in Brazil and Indonesia hits the market from April onward,” Arzeno added.

According to Volcafe, the global market could face a shortage of 100,000 bags across the 2015-16 growing season.

Of course, Andrea Illy, the chairman and chief executive of Illycafe, warned that such shortages would become commonplace as consumer demand increases at the same time global warming reduces harvests. “We don’t know where this coffee will come from,” he said at last year’s Global Coffee Forum.

Robusta prices on the ICE Futures Europe exchange rose slightly on Tuesday morning, partly in response to the forecasts emanating from Southeast Asia.