Export performance of Indonesian coffee, 1978-1998

This study examined the Indonesian coffee export performance using time-series data from 1978 to 1998. Specifically, it generated an overview of the world coffee market situation; described trends in domestic production, consumption, prices, export volume, value and export price, determined the factors affecting export demand; assessed the impact of government policies on the export performance of the Indonesian coffee industry; assessed the impact of coffee export on the domestic economy; and recommended strategic plan of action to improve the export performance of the coffee industry. The United States of America, European Union, and Japan were the top three markets for world coffee, absorbing more than 85 percent of total exports during the period 1993-1998. Trend analysis showed that domestic production and consumption of coffee in Indonesia were generally increasing in the period 1978-1998. Domestic production grew by 2.96 percent annually despite of a 0.92 percent decline in yield. The expansion in area planted at 4.28 percent annually led to an increase in coffee production. Domestic price of coffee exhibited an upward trend from 1980 to 1986 and 1993 to 1998, and a downward trend in between. The export price of Robusta fluctuated from 1978 to 1998 following the fluctuations in world prices. The volume of robusta exports also fluctuated on a yearly basis following the total coffee export pattern, while Arabica exports experienced an increasing trend. The market share and competitiveness analysis suggested that the export share of Indonesian coffee exports would tend to increase when the coffee world trade improved. The Indonesian coffee exports would be more competitive than other major competing countries and responsive to relative prices as well as to world demand. Regression results of export demand analysis indicated that the demand for coffee export increased when the exchange rate of the rupiah relative to the dollar and the real income of the importing countries surged. However, the demand for coffee declined when export rise and export volume from competing countries increased. The coffee export earnings showed significant effect on the GNP during the period 1978-1998. On the other hand, the coffee export earnings positively contributed to the total country's export earnings. To improve the export performance of Indonesian coffee and increase the contribution of coffee to the domestic economy, the following recommendations are suggested: (1) increase production of Arabica and Robusta coffee, (2) extension of government credit support to coffee smallholders and exporters, (3) improvement in the quality of coffee to increase competitiveness in the world market, and (4) development of an effective and efficient market information system so that coffee growers, processors and exporters can respond to the existing world market situation.