24 January 2020 (closed)
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Traders expect that Indonesia’s coffee production will be negatively affected by the El Nino weather phenomenon. Due to concern about Indonesia’s 2016/2017 season robusta output, European roasters are reportedly set to raise robusta imports from Vietnam, the world’s top robusta grower, or low-quality arabica from Brazil, the world’s top arabica grower.
The El Nino weather phenomenon involves periodical warm ocean water temperatures off the western coast of South America that can cause climatic changes across the Pacific Ocean such as prolonged dry weather in Southeast Asia hence damaging the output of agricultural commodities.
El Nino is expected to cause a lack of rainfall in Indonesia in the first quarter of 2016 and as irrigation infrastructure is not optimally developed in the world’s third-largest coffee grower, this weather phenomenon may have a significant impact on the nation’s coffee output. Many coffee plantations in Indonesia are owned by local smallholders who lack the financial means and technical skills to offset the negative impact brought about by El Nino. Due to prolonged drought coffee trees could see their production rates decline by between 30 and 40 percent. In Indonesia, robusta trees usually start to flower in September. It then takes approximately eight months to produce robusta coffee.
Britain's Met Office recently stated that there is already evidence of reduced rainfall in Asia and this dry weather could persistent well into the new year. The institution expects El Nino to peak in late December and claims that it will require a couple of months before its impact has waned.
Vietnamese robusta coffee is an easy substitute for Indonesian robusta coffee and therefore traders may switch to Vietnamese robusta. Whether the price of Vietnamese robusta could be supported by such a development remains unknown as Vietnam still has a large carryover of old-crops (as well as expectation of a large Vietnamese harvest).
Earlier, the Association of Indonesian Coffee Exporters and Industries (AEKI) estimated that Indonesian coffee output will reach 600,000 to 650,000 tons in the 2015 season, which is lower than the institution’s earlier forecast of 650,000-700,000 tons and below production realization of 711,513 tons in the previous year. Other analysts and industry groups said that the El Nino phenomenon may reduce AEKI’s forecast by about 50,000 tons in the 2015 season.