Coffee Investment in West Java, Indonesia

September 2, 2019

Indonesia is one of the largest coffee exporting countries in the world. Most of the coffee production that is exported from Indonesia is Robusta. In addition to being one of the world’s largest coffee producing and exporting countries, Indonesia is also known to have a number of specialty coffees such as ‘Kopi Luwak’, known as the most expensive coffee in the world and ‘Mandailing coffee’. Regarding agricultural commodities, coffee is Indonesia’s largest foreign exchange earner for palm oil, rubber and cocoa.

For the first time, coffee was introduced to Indonesia by the Dutch. Beginning with planting coffee trees around the Dutch fort in Batavia (now known as Jakarta), then coffee production quickly spread to the Bogor and Sukabumi areas in West Java in the 17th and 18th centuries. Indonesia has an almost ideal climate for coffee production, so plantations were soon established in other parts of Java and on the islands of Sumatra and Sulawesi.

According to Indonesia Investments’ article, nowadays, “Indonesia’s coffee plantations cover a total area of approximately 1.24 million hectares, 933 hectares of robusta plantations and 307 hectares of Arabica plantations. More than 90 percent of total plantations are cultivated by small-scale growers who own relatively small plantations of about 1-2 hectares, each. Contrary to competitors such as Vietnam, Indonesia does not have big coffee plantations and therefore encounters more difficulties to safeguard stable production volumes and quality, hence its output loses some competitiveness on the international market.” (July, 2019)

Similar to regional coffee giant Vietnam, the bulk of Indonesia’s coffee bean production consists of the lower-quality robusta type. However, the quality is increasing because one needs high-quality Arabica beans. These beans are mostly from South American countries such as Brazil, Colombia, El Salvador and Costa Rica. Thus, most of Indonesia’s coffee exports (around 80 percent) consist of robusta beans, not processed robusta coffee. The export of processed coffee is only a small part of Indonesia’s total coffee exports.

These are the data from Indonesia Investments’ article, provinces that account for most of Indonesia’s coffee production are:

           Robusta         Arabica
1. Bengkulu (Sumatra) a. Aceh (Sumatra)
2. South Sulawesi b. North Sumatra
3. Lampung (Sumatra)

Starting from the 1960s, Indonesia has shown a small but stable increase in domestic production of coffee. However, according to data from Statistics Indonesia, the size of coffee estates in Indonesia are in decline as farmers have shifted their focus to products from the oil palm (such as crude palm oil and palm kernel), rubber and cocoa which all have higher yields on the international market. Coffee estates – or parts of such estates – have thus been transformed into plantations of other commodities.

In 2012, approximately 70 percent of Indonesia’s total annual coffee bean production was exported, mainly to customers in Japan, South Africa, Western Europe and the USA. However, as Indonesia’s domestic consumption of coffee has been growing, exports have declined. Coffee consumption in Indonesia rose by a Compound Annual Growth Rate (CAGR) of 7.7 percent in the years 2011-2014. Still, at 1.0 kilogram (2014 data), per capita consumption of coffee remains low in Indonesia.

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