Latest / Trumponomics / There's a Crisis Brewing in the Coffee Industry

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There's a Crisis Brewing in the Coffee Industry · Trumponomics

• 0:00
  Speaker 1: There's something brewing in the world of coffee, and it's
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  Speaker 1: not good. Indonesia, the country that includes the island of Java,
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  Speaker 1: simply isn't making enough Java. It's being forced to import
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  Speaker 1: the delicious and addictive beans from Vietnam and Brazil. What's
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  Speaker 1: going on here? Chains like Starbucks are expanding in Asia
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  Speaker 1: as the region becomes wealthier, and downtown Jakarta, the Indonesian capital,
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  Speaker 1: has more than a few You might think this would
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  Speaker 1: mean happy days on well Java, think again. Welcome to
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  Speaker 1: Benchmark Show about the Global Economy. I'm Scott Landman, economics
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  Speaker 1: editor with Bloomberg News and Washington. I'm joined by Daniel Moss,
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  Speaker 1: economics writer and editor at Bloomberg View in New York.
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  Speaker 1: Thanks Scott Noice to be with you, and just to
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  Speaker 1: give listeners a sense of the historical significance of what's
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  Speaker 1: happening here. The country now called Indonesia has deep historical
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  Speaker 1: resonance in the coffee industry. The Dutch East India Company
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  Speaker 1: was the first importer of coffee to Europe in any
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  Speaker 1: meaningful way. Dutch colonists grew the crop in Java, and
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  Speaker 1: production subsequently spread to Samatra and Sulawesi. Now. Undoing Java's
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  Speaker 1: iconic status is a combination of climate change, plague, and
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  Speaker 1: the evolving economic structure of coffee farms. All right, well,
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  Speaker 1: Joining us now is Jamal Gawie, a climate change and
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  Speaker 1: biodiversity consultant in Indonesia who recently authored an opinion article
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  Speaker 1: in the Jakarta Post decrying the industry's demise. Jamal, welcome
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  Speaker 1: to Benchmark. Thank you hi everybody. So let's just start off.
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  Speaker 1: Tell us how serious is the challenge to coffee growing
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  Speaker 1: in Indonesia. Of all places, as you already Masia e
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  Speaker 1: Police in Asia is one of the country that produce
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  Speaker 1: a lot of coffee, is the largest producer in the worlds. However,
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  Speaker 1: recently a read the production of coffee Inuitia has been
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  Speaker 1: declining in some areas, especially in Java for example, the
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  Speaker 1: decline could reached twenty to and this is very serious.
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  Speaker 1: So I tried to find out what is going on
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  Speaker 1: with the coffee industry in Indonesia and also in other countries. Actually,
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  Speaker 1: there are a number of vectors causing the production decline.
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  Speaker 1: First and the most important things is climate change. Increased
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  Speaker 1: temperatures and change of rainfall are responsible for reduction in
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  Speaker 1: coffee production. The related phenomena including long drought months and
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  Speaker 1: less web man accompanied by pass udbrey a common education
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  Speaker 1: of the crisis and the arabic Ca caffee. This is
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  Speaker 1: the premium caffee. The arabic Ca caffee plant response sessively
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  Speaker 1: sensitively to increasing temperature, especially during the blashoming and factification.
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  Speaker 1: Along the similar line, increased temperature will have false farmers
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  Speaker 1: to go to higher attitude to start new caffee plantation.
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  Speaker 1: The problem is at the higher altitude, most of the
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  Speaker 1: land are at the steep slop and land availability is
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  Speaker 1: limited because most of the land have been dedicated for
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  Speaker 1: protection forests or protected area. So in appropriate plentying tennique
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  Speaker 1: in the steep slope and clearing the forest for coffee
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  Speaker 1: plantation we also cause serious incremental issues and if an tumal.
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  Speaker 1: I'm struggling with how this can be happening. One of
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  Speaker 1: the big economic narratives of the past hundred years has
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  Speaker 1: been the rise of the Asian consumer. Pretty much the
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  Speaker 1: last thing I saw when I left Jakater Airport a
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  Speaker 1: few weeks ago, for example, was a Starbucks. So how
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  Speaker 1: can you reconcile a crisis in coffee production. With a
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  Speaker 1: lot of demand for coffee, surely it should be a
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  Speaker 1: boom time for coffee. So this is happening not only
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  Speaker 1: in Asia. The coffee production actually declaiming, what the demon
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  Speaker 1: is increasing. So how can we supply the market with coffee?
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  Speaker 1: The first thing with happening in Autia is by importing
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  Speaker 1: coffee from Brazil. And yet now this is just to
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  Speaker 1: feed the market. That seems like Saudi Arabia importing oil, Yes,
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  Speaker 1: something like that. Yeah. The reason for this because the
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  Speaker 1: production in Autia is declaiming while at the same time
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  Speaker 1: the dem and is increasing. So how to to deal
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  Speaker 1: with that is by importing the coffee being from other countries.
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  Speaker 1: So Jamal, you mentioned climate change as a principal culprit
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  Speaker 1: in this challenge to production of coffee Indonesia, But is
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  Speaker 1: there anything else say about the economic structure of coffee
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  Speaker 1: farms in Indonesia that's also part of this issue. Yeah.
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  Speaker 1: Other factors that also causing the declining of coffee production
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  Speaker 1: is the the management of the production itself in Indonesia
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  Speaker 1: and some other Asian countries excluding Vietnam, because Vietnam has
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  Speaker 1: a very efficient system. Right now, the production management is
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  Speaker 1: still not very optimal. For example, many old non productive
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  Speaker 1: coffee trees are still maintained by farmers, so this is
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  Speaker 1: also posting the decline in production. So this is another
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  Speaker 1: aspect of that. So there are a number of factors
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  Speaker 1: actually hosting this decline of production. You mentioned about the
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  Speaker 1: structure of the caffee farm. Yeah, when talking about the
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  Speaker 1: the economic structure of the caffee farming, we should also
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  Speaker 1: talk about all actors involved in the famuchines of caffee production.
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  Speaker 1: The one who produced coffee being are mostly small holder
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  Speaker 1: caffee farmers. Around n all coffee producers indoor is small
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  Speaker 1: holder caffee fomers. So the first one affected by climate
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  Speaker 1: change are these farmers. The problem is in many cases
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  Speaker 1: they have been treated unfairly by the market because the
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  Speaker 1: market prices that's not really account for the many reasons
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  Speaker 1: that the farmers should take in producing coffee being in
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  Speaker 1: the age of the climate change. These trees includes for example,
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  Speaker 1: decreasing of coffee being quality, increased production costs due to
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  Speaker 1: the need for higher input. This is some of the
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  Speaker 1: the risk. Yeah. So in my opinion, in order to
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  Speaker 1: reverse this treation and make it fair to the small
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  Speaker 1: holder farmers, the markets and all actors involved in the market,
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  Speaker 1: including big and small buyers and also consumers should also
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  Speaker 1: account for the reason the farmer will have to make
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  Speaker 1: to produce their coffee berries, Jamal, If we understand you correctly,
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  Speaker 1: people are clearing forests to make more room to grow coffee,
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  Speaker 1: but that deforestation is setting and trained dynamics which ultimately
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  Speaker 1: destroy the crop. Yes, you can see that because what
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  Speaker 1: is going on right now. When the farmer tried to
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  Speaker 1: find a new land to plan their coffee plantations, they
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  Speaker 1: will go to a higher ground, to higher altitude, and
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  Speaker 1: these higher altitude places are mostly steeped through area or
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  Speaker 1: montinis there. So when they clear the partiest there first,
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  Speaker 1: they also break the law because it's protected area and
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  Speaker 1: they cannot do that any second. It also costs another
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  Speaker 1: serious impromental issues like in Rossia landslide and also will
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  Speaker 1: cause flooding to the lower level and at the end
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  Speaker 1: it will also destroy their their problems. So let's hope
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  Speaker 1: to see displasia. Let's talk about the Asian consumer now here.
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  Speaker 1: Coffee in Asia, especially at places like Starbucks or other
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  Speaker 1: upscale chains, is not something that's a very cheap commodity.
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  Speaker 1: Is there a price at which these kinds of issues continue,
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  Speaker 1: you know, and the price of coffee may go up
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  Speaker 1: over time. Is there a higher price at which the
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  Speaker 1: consumer in Jakarta might not want to buy his or
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  Speaker 1: her regular coffee the station right now? As we discussed before,
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  Speaker 1: actually there are more and more people drinking coffee. They
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  Speaker 1: love coffee, especially the younger, younger generation, especially in in
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  Speaker 1: bi small cities in Asia. It seemed to me right now,
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  Speaker 1: whatever the price, they will buy because you see, like
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  Speaker 1: drinking coffee has become what you call it, it's trendy. Trendy. Yes,
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  Speaker 1: when you're in your car type you go to start
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  Speaker 1: back or at the brand coffee shop, you will see
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  Speaker 1: many young people are walking there. So it's it's a trend.
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  Speaker 1: So people start to love coffee. And I have seen
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  Speaker 1: this I straight for a lot in Eusia, in small
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  Speaker 1: and big cities. I'm surprised to see that there are
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  Speaker 1: many coffee shop right now all of Idunsia. So this
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  Speaker 1: is a trendy. So Tamal, even if the price doubled
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  Speaker 1: or tripled, do you think people would still buy this
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  Speaker 1: much coffee or do you think you know it would
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  Speaker 1: be some declined in to man. Of course, you know,
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  Speaker 1: if you followed the economic law, when the press increased
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  Speaker 1: too much, that there will be a certain point where
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  Speaker 1: people will not stop but reduced consuming a coffee. There
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  Speaker 1: is a strong possibility for that, but it's difficult for
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  Speaker 1: me to answer where there's double or triple the price,
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  Speaker 1: you know, but what I can see right now is
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  Speaker 1: even starbuck is quite expensive. But I'm surprised to see
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  Speaker 1: that this. You know, millennium generation young people, they keep
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  Speaker 1: coming back to start back. What happens if things continue
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  Speaker 1: on their present course? What happens to the coffee industry
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  Speaker 1: if we can't address these problems in Java, which as
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  Speaker 1: I said earlier, sounds like the Saudi Arabia of coffee.
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  Speaker 1: If we can't get it right there, what are the implications?
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  Speaker 1: There are some implications, not one the first implication, of course,
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  Speaker 1: with the decrease of production, the press will go up.
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  Speaker 1: And then the second, if this climate change continue affecting
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  Speaker 1: the coffee plantation, we will start losing the character of
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  Speaker 1: the real coffee because the taste is changing already right now.
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  Speaker 1: And this is serious because, for example, where the bios
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  Speaker 1: would like to buy the the specialty coffee let's see
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  Speaker 1: from the highlands of Gayo in they are asking questions
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  Speaker 1: right now whether the farmlers in Gio are selling the
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  Speaker 1: right coffee to them because the character of the coffee
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  Speaker 1: are changing. And Jamal, just for our listeners, when you
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  Speaker 1: say Arch, we are talking about a province at the
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  Speaker 1: western tip of Sumatra, Yes, exactly. Yeah, this is uh
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  Speaker 1: the home of one of the best coffee in the
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  Speaker 1: worlds Gario Arabica Arabic a coffee. Yeah. So that is
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  Speaker 1: what going on right now. So climate change is not
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  Speaker 1: only affect the production, meaning decreasing the production, planning the production,
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  Speaker 1: but it also affects the taste of the coffee. We
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  Speaker 1: have to expect losing the good taste of Arabican coffee
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  Speaker 1: from Vario because of climate change. Is it possible, if
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  Speaker 1: we continue on this course that inside ten or fifteen years,
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  Speaker 1: coffee could taste completely different from how coffee tastes now. Yes,
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  Speaker 1: you can see that, and it is happening right now
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  Speaker 1: because the way the buyers or people involved in this
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  Speaker 1: coffee industry, they have a certain way to great coffee.
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  Speaker 1: There are at least like what ten or more characters
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  Speaker 1: they use. Yeah, and it is changing right now. That's
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  Speaker 1: what I can see. Yeah, based on my estradio in
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  Speaker 1: the field, Well, I can say that we will always
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  Speaker 1: be looking back on the good old days of coffee,
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  Speaker 1: I'm sure and a few years Jamal goee. Thank you
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  Speaker 1: so much for taking the time to be with us today. So, Dan,
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  Speaker 1: what's your big takeaway from all this? It's interesting the
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  Speaker 1: way our conversation with Jamal developed. We began with an
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  Speaker 1: overall macro idea that Indonesia, kind of the Saudi Arabia
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  Speaker 1: of coffee, was having a problem, and we ended up
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  Speaker 1: with how wait a minute, these forces could mean that
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  Speaker 1: your coffee in a couple of years might not actually
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  Speaker 1: taste like coffee. Climate change in economics are changing the
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  Speaker 1: way a hot commodity actually tastes. And yet, like a
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  Speaker 1: lot of things in economics, I think it's going to
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  Speaker 1: be a little slower. I think it's going to be
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  Speaker 1: one of those slow move being kind of things where
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  Speaker 1: you don't really notice it. Maybe your coffee will change
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  Speaker 1: slightly from year to year, and then you know, ten
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  Speaker 1: or fifteen years from now, we're going to be sitting
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  Speaker 1: around and talking about how poorly are coffee tastes and
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  Speaker 1: thinking about, well, maybe it really was that good in
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  Speaker 1: the good old days, and all those coffee stools that
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  Speaker 1: have job are in their name might have to change
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  Speaker 1: or it'll just be a taste of nostalgia. Benchmark will
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  Speaker 1: be back next week. Until then, you can find us
• 14:27
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• 14:30
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• 14:34
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• 14:37
  Speaker 1: to rate and review the show, and you can also
• 14:39
  Speaker 1: find us on Twitter. You can follow me at at
• 14:42
  Speaker 1: scott Landman Dan you are at moss Underscore Echo. Benchmark
• 14:47
  Speaker 1: is produced by Tofur Foreheads ahead of Bloomberg. Podcast is
• 14:51
  Speaker 1: Francesca Levy. Thanks for listening, See you next time. I
• 15:01
  Speaker 1: Stay the Mahanta, the sunder Barker and my fingers Apoll