Indonesia’s Growing Thirst for Coffee Drains Premium Bean Supplies

Indonesia’s Growing Thirst for Coffee Drains Premium Bean Supplies


Pengalengan, W. Java/New York — For decades, Indonesia has supplied coffee roasters worldwide with prized beans that give a distinctive taste to brews favored by connoisseurs. Most local, however, preferred tea. But now, as younger generations switch to coffee and hundreds of coffee shops and roasters pop up across the archipelago, Indonesia’s consumption of beans is rising. That has left less coffee for exports and force up prices for foreign buyers. A small harvest in Sumatra has eaten further into tightening supplies of that region’s unique arabica beans, which are sought for the heavy, earthy notes they give to roasted blends. Sumatran beans are a key component in Starbuck Corp’s Christmas Blend, which has been sold for more than 30 years. Sumatra’s lower production caused some exporters to delay and even default on deliveries, sources at importing companies said, forcing some importers to pay more to secure supplies. Inventories in the United States have dwindled, with many importers saying they have enough to meet contracts with roasters but nothing left for the spot market. Major roasters Starbuck and Keurig Green Mountain are the biggest buyers of Sumatran arabicas, importers say and smaller companies appeared to be facing the biggest challenges sourcing those beans. Coffee consumption in Indonesia has nearly doubled in the past 10 years, as many young Indonesians were influenced by coffee habits in countries such as Australia and the United States where a lot of them went to study. “We’re seeing very strong coffee expansion in many markets but Indonesia is very much a market where demand is growing heavily,” said Michael Schaefer, global lead of Food and Beverage at Euromonitor International. While major producing countries such as Brazil, Vietnam, Colombia and Indonesia have historically exported their best coffee, rising interest in premium beans from local coffee shops is changing this, Schaefer said. Many roasters are offering farmers significantly higher prices for their arabica beans, said Pranolo Soenarto, vice president of the Association of Indonesian Coffee Exporters and Industries. Irvan Helmi, co-founder of local roaster and cafe Anomali in Jakarta, said local buyers’ close proximity to farmers enabled them to pay higher prices while selling directly to consumers at better profit margins. Indonesia’s annual coffee bean output has fallen by around 8 percent over the past five years, Indonesian Agriculture Ministry data shows. Farmers say unpredictable weather, poor crop maintenance and switching to other crops is responsible for lower yields. Exports from the world’s largest coffee-growing nation has dropped by around 20 percent in the past five years, according to data from U.S. Department of Agriculture. In Sumatra, limited availability of arabica coffee sent prices to a record high in April. Arabica is a higher quality bean that is typically roasted and brewed. Its cousin, robusta, known for its bitter taste, is processed into instant coffee and used as a lower cost component in roasted blends. Robusta makes up 90 percent of Indonesia’s coffee harvest. The arabica grown in Sumatra is unique, in part due to the unusual drying process employed there. While farmers in other countries have tried to replicate, importers say the results are unreliable and only on a small scale. “Competition to buy coffee from producers has been fierce,” said Robert Babington Smith, a senior trader for California-based importer InterContinental Coffee Trading Inc. Prices of unprocessed or partially dried Sumatran arabicas purchased at farms rose to a record $5.90 a kilogram in April, while arabica beans already in U.S. warehouses fetched premiums of $2.20/lb or more over the global benchmark price, nearly double last year’s price, Babington Smith said.

Source: jakartaglobe:id/Rueters