World Coffee Demand And Prices Rise, LPEI Intensify Foreign Exchange Village Development To Reach Global Market

Photo: Doc. LPEI

JAKARTA - World coffee demand is gradually increasing after almost two years of decline due to the impact of the global pandemic. The logistics supply chain has been disrupted due to the policies of a number of countries that limit the transportation and inflow of goods between countries.

The scarcity of containers also causes logistics costs to rise many times. This obstacle has also caused the volume of coffee trade to decline, especially in the world export market route.

Indonesia as the fourth largest coffee producer in the world after Brazil, Vietnam and Colombia, was also affected by this condition. However, almost no coffee business actors have gone out of business and switched to other commodity businesses. This shows that the decline in the pure coffee business is a result of the pandemic and supply chain disruption, not due to reduced market demand.

Entering 2021, world coffee demand has shown an encouraging trend. The rebound in Indonesia's coffee export value was supported by the increase in world coffee prices.

The growth in the value of coffee is still minus, which is -1.9 percent in the cumulative period of January - October 2021, but relatively improved from minus 6.9 percent in 2020. The largest export portion is the type of coffee that is not roasted (98.51 percent) with a growth in value of exports -7.22 percent yoy (year on year) in 2020.

Business Director II of the Indonesian Export Financing Agency (LPEI) Maqin U. Norhadi said, LPEI/Indonesia Eximbank as the Ministry of Finance's Special Mission Vehicle, has been preparing for national exports since last year by encouraging the development of the coffee business. One of them is implementing the Foreign Exchange Village program specifically for coffee, which began in Subang Regency, last July 2021.

Previously, Finance Minister Sri Mulyani Indrawati also asked LPEI to be more creative and innovative, so that Indonesia could take advantage of the momentum of economic recovery.

"We are faced with a world environment that is moving very fast. Exports are one of the most important growth engines. LPEI which functions as a credit provider or credit enhancer, as a facilitator, accelerator, and aggregator must increase creativity and innovation," said Sri Mulyani.

Based on records from the Indonesia Eximbank Institute, world coffee demand in 2022 will continue to increase along with higher prices. Moreover, the market is also getting wider. The first export of coffee fostered by the LPEI Foreign Exchange Village in Subang alone reached 18 tons for the purpose of Saudi Arabia.

In fact, traditional coffee markets such as the US, Japan, Germany, and other European countries continue to grow. These national coffee exporters, based on records from the Indonesia Eximbank Institute, are spread across Semarang, Banda Aceh, Deliserdang, Medan, Bandar Lampung, Surabaya and Sidoarjo, as well as Malang.

LPEI also noted that the market for more specific coffee demand niches, such as organic coffee, was very bright. Therefore, apart from Subang, LPEI also assists the development of the organic coffee business in the Ijen Mountains area, Banyuwangi.

"This year, it is targeted that organic Java ijen coffee can be exported to meet the Japanese market. The villages in this area are part of the LPEI Foreign Exchange Village program, which in 2022 is targeted to reach around 100 villages through the Foreign Exchange Village program," said Maqin U. Norhadi.