Dry weather caused by El Nino is expected to lead to a ten percent decline in Indonesia's coffee production in 2016. El Nino, which occurs once every five years on average, involves periodical warm ocean water temperatures off the western coast of South America that can cause climatic changes across the Pacific Ocean, leading to severe droughts in key agricultural-producing countries in Southeast Asia, including Indonesia. The El Nino in 2015-2016 is the worst one in nearly two decades.
The heavy El Nino may cut the robusta coffee bean harvest in Indonesia, the world's fourth-largest coffee producer, to 570,000 metric tons in the season that started on 1 April 2016, down from 636,300 tons in the harvest period one year earlier. According to local analysts the country's main coffee-growing region of South Sumatra has been plagued by dry weather and therefore the harvest will be weak this year. The harvest in the highland will commence in June or July. However, traders do not expect to see a major harvest due to the unconducive weather conditions.
While El Nino is currently fading, there has started to emerge concern about the arrival of La Nina. La Nina - the opposite of El Nino - brings cooler than average sea temperatures in the central and eastern tropical Pacific Ocean causing wetter-than-usual weather in Southeast Asia. Heavy and prolonged rain will also damage the coffee beans. Analysts claim that there is a 50 percent chance of La Nina making her presence felt in the August-October period in Indonesia.
These developments do have a good impact on the global coffee prices. Robusta beans are currently trading around USD $1,650 per ton on ICE Futures Europe. So far this year the price has climbed 7.8 percent. Last year it slumped 20 percent. Provided coffee production in Indonesia will indeed fall by 10 percent then it should give more upward momentum for the coffee price.
Indonesia is one of the world's key coffee producers and exporters. Most of Indonesia's output - nearly 80 percent - is the robusta bean. The provinces of South Sumatra, Bengkulu, and Lampung account for about 75 percent of Indonesia's total robusta output. Although playing a minor role, arabica bean plantations can be found in North Sumatra and Aceh.