STiR coffee and tea magazine

28 STiR coffee and tea | 2024 Issue 4 (August / September) Indonesia," he wrote. "Farmers treat coffee as a supplementary income source rather than a pri- mary one. They primarily grow staple food crops for daily sustenance and only use a portion of their land for coffee. This dual focus leads to inconsis- tent coffee productivity and limited investment in coffee cultivation, as it does not significantly en- hance their overall income." The Indonesian government aims to increase coffee productivity per hectare. During a recent visit to a coffee farm in Kembahang Village, West Lampung, Indonesian President Joko Widodo called on the agriculture minister to focus on the coffee industry. "Our joint task is to significantly raise produc- tivity. If productivity increases, the welfare of coffee farmers will improve," Widodo stated on his official social media account. He announced that the gov- ernment has increased fertilizer allocation from 4.5 million tons to 9.5 million to support this endeavor. The government also collaborated with state- owned enterprises to form the Nusantara Coffee Project Manager Office (PMO) Program. In a press release, Dwi Sutoro, chairperson of PMO, said, "To date, we have facilitated more than 6,500 hectares of land managed by 2,500 farmers. We hope that the harvest from the land will be used to meet the needs of the domestic and international markets." Sutoro added, "PMO Kopi Nusantara devel- ops various assistance programs and encourages the creation of a sustainable business ecosystem with the target of increasing the income and wel- fare of coffee farmers in the country." In light of these recent developments, the rep- resentative from Bandung Coffe Exchange com- mented, "With all these achievements and poten- tial, we can safely say that the Indonesian coffee industry is indeed progressing. However, we need a better blueprint or roadmap for this industry to improve and advance more. Also, it would be great to see more solid collaborations between the upstream and downstream sectors of the industry. It's there, but we believe it can be better." President Joko Widodo plants coffee with farmers in West Lampung, Indonesia. | Photo Courtesy Antara Ethiopia briefly experimented with liberalization in the early 1990s. As Africa's largest coffee producer, the country experienced a brief increase in production during that time. However, relying on a volatile commodity like coffee to increase export earnings proved unsuccessful. Nearly 35 years later, the Ethiopian govern- ment is once again liberalizing its coffee sector. In an email to STiR, Egziael Buzeyahu from the East African Holding Company discussed what went right and wrong in the past. "In the 1990s, Ethiopia's attempt to open up the coffee sector to for- eign direct investment had mixed effects. Some smallholder farmers benefited from better equipment and training, leading to higher yields. However, large foreign companies dominated the market, benefiting from new investments, processing facilities, and market access." "This made it difficult for smallholder farmers to compete and secure fair prices, with limited bargaining power and unequal access to resources." Buzeyahu continues. "The focus on exports also led to volatile local prices, impacting small farmers' livelihoods. This experience highlighted the need to protect smallholder farmers while encouraging FDI investment." According to Dagato Kumbe, the deputy head of the Ethiopian Invest- ment Commission (EIC), greater attention is being paid to balancing the needs of smallholders as well as local and foreign investors. A US Foreign Agricultural Service (FAS) report states that Ethiopia is ex- pected to produce around 8.35 million 60-kg bags of coffee for 2023/2024. "The livelihood of 25% of the country's population is directly or indirectly dependent on the coffee value chain and will remain so in the years to come." (FAS) Proponents of Ethiopian liberalization believe that FDI can contribute to building better infrastructure, roads, processing facilities, and storage capaci- ties, which will improve efficiency and reduce postharvest losses. The Ethiopian government stipulates that foreign investors must provide logistics services facilitating wholesale operations and modern marketing in- frastructures. For coffee exports, a $10 million annual procurement history and a com- mitment to exporting $10 million annually for the next three years are re- quired. Local players will struggle to meet such steep requirements. With around 95% of Ethiopian coffee production in the hands of smallhold- ers, it's imperative that their needs are addressed for liberalization to succeed. "Smallholder coffee farmers in Ethiopia primarily need support in se- curing fair market prices, improving infrastructure, enhancing farming tech- niques through training, and adapting to climate challenges," said Buzeyahu. Obtaining loans and access to credit is difficult for most smallholders. Fluctuating international coffee prices and delayed payments make investing in new equipment, irrigation systems, and seedlings nearly impossible. Aging coffee plants are also a serious issue for many Ethiopian farmers. Buzeyahu concludes, "It will be important to learn from past experiences of liberalization both in Ethiopia and beyond, to have targeted policies in place in order to protect smallholder farmers and ensure that they benefit from FDI." Global to Regional Partnerships As Indonesia, Ethiopia, and many other coffee-producing countries navigate the current coffee crisis, the role of global corporations can't be ignored. For- eign investment and capital are necessary at all levels of the coffee supply chain, especially at the farm level. More connections and partnerships should be formed between all actors in the coffee value chain, including global cor- porations and local governments. To benefit from the international market, producers need up-to-date and understandable market information, access to efficient strategies, and insti- tutional partnerships. Building information and integrating corporate share value at the farm gate level strengthens the foundations of the value chain from the bottom up.

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