Global Coffee in Transition: How Indonesia and Other Producers Are Responding to EU Deforestation Rules

That it is not the strongest or the smartest that will survive, but those who can best adapt to change. This statement is highly relevant to the situation we face today, especially in the context of the European Union's proposed deforestation regulations. These regulations will prohibit the sale of commodities that violate these rules in the European market, including coffee.

image: evaneos.com

In an interview with Darwin Jasmin, founder of AWI Coffee and a coffee exporter from Indonesia, he explained that the EU deforestation regulations pose a significant challenge for coffee industry players in Indonesia. 

The proposed regulations require companies to ensure that their products are not linked to deforestation or forest degradation after December 31, 2020. This means that our supply chains must be free from involvement in deforestation.

image: worldwildlife.org

According to Darwin, this regulatory change certainly puts considerable pressure on countries that rely on exports to the European Union. "However, we must learn from history that those who can adapt will survive. Markets change, business practices change, and regulations change. We must be able to adapt to these situations," he said.

The Indonesian government, through the Ministry of Trade, has also responded seriously to these regulations. According to an official statement from the Ministry of Trade, Indonesia expressed concerns about the economic impact of the EU deforestation regulations on Indonesian exports, particularly commodities such as coffee. 

The Ministry of Trade has engaged in trade diplomacy to ensure that these regulations do not unduly burden industry players in Indonesia. "We are negotiating to ensure that the requirements set by the EU are more realistic and do not disadvantage products from Indonesia that already adhere to sustainability standards," a representative from the Ministry of Trade stated.

Nonetheless, Darwin sees opportunities behind this challenge. "We can still export to Europe if we can meet the requirements set by the EU regarding deforestation. If we can meet these strict standards, we will have a significant advantage over other competitors," Darwin explained.

Furthermore, Darwin suggested that Indonesian coffee industry players should not only focus on the European market but also begin exploring alternative markets such as China and the Middle East. "Reducing dependence on the European market can be a good strategy. This is an opportunity for us not just to survive but to grow amid global challenges," he said.

Darwin emphasized the importance of focusing on what can be controlled. "Instead of worrying about things beyond our control, it is better to focus on what we can control—meeting new standards and exploring new markets. That way, we will not only survive but also succeed in facing this challenge," he concluded.

In addition to Indonesia's response, other major coffee-producing countries have also expressed their concerns about the EU deforestation regulations.

Brazil, the world's largest coffee producer, has actively opposed these regulations. The Brazilian government argues that the EU deforestation regulations could become non-tariff barriers that will harm small and medium farmers who struggle to meet the required standards. They also emphasize that developing countries need more support in terms of technology and funding to implement sustainable practices

The leading coffee producer in Africa, Ethipioa, stated that these regulations could have a significant impact on their economy, which is highly dependent on coffee exports. The Ethiopian government emphasized the need for more inclusive international dialogue to ensure that these regulations do not overly burden poorer countries and do not exacerbate poverty among smallholder farmers.

Indonesia's Coffee Production and Export in 2022: Latest Statistical Report

As one of the world's largest coffee producers, Indonesia continues to show strong performance in the coffee industry. According to the 2023 Indonesia Statistical Report released by the Central Bureau of Statistics (BPS) and reviewed by Katadata.id, throughout 2022, Indonesia successfully exported a total of 434,190 tons of coffee. This figure represents an increase of 12.92% compared to the previous year (year-on-year/yoy). The total value of the country’s coffee exports in 2022 reached USD 1.13 billion.

Major Coffee Export Destinations

The United States was the primary destination for Indonesian coffee exports in 2022. Coffee exports to the United States reached 55,750 tons, accounting for about 12.84% of total national exports, with a value of USD 268.04 million. Egypt followed as the second-largest destination, with export volumes of 37,610 tons valued at USD 82.17 million. Germany ranked third, with a volume of 36,970 tons and a value of USD 80.93 million.

Here are the details of Indonesia’s top coffee export destinations in 2022:

1. United States: 55,750 tons (USD 268.04 million)

2. Egypt: 37,610 tons (USD 82.17 million)

3. Germany: 36,970 tons (USD 80.93 million)

4. Malaysia: 26,100 tons (USD 53.25 million)

5. Italy: 24,000 tons (USD 48.98 million)

6. Russia: 22,690 tons (USD 44.16 million)

7. Belgium: 22,190 tons (USD 65.04 million)

8. United Kingdom: 20,770 tons (USD 48.25 million)

9. Japan: 18,830 tons (USD 59.05 million)

10. Canada: 2,290 tons (USD 15.6 million)

In addition to these countries, Indonesia’s coffee exports to other nations totaled 166,940 tons with a value of USD 370.78 million.

Domestically, South Sumatra was the largest coffee-producing province in 2022. The province produced 212,400 tons of coffee, contributing 26.72% of the national coffee output. This production volume marked a slight increase of 0.33% compared to the previous year.

Here are the top 10 coffee-producing provinces in Indonesia in 2022:

1. South Sumatra: 212,400 tons

2. Lampung: 124,500 tons

3. North Sumatra: 87,000 tons

4. Aceh: 75,300 tons

5. Bengkulu: 60,100 tons

6. East Java: 45,800 tons

7. South Sulawesi: 29,400 tons

8. Central Java: 26,900 tons

9. East Nusa Tenggara: 26,600 tons

10. Jambi: 19,500 tons

On the other hand, the provinces of Bangka Belitung Islands, Gorontalo, and West Papua were recorded as the lowest coffee-producing regions, each producing only 0.1 tons or 100 kilograms (kg) of coffee.

In 2022, there were 76 coffee plantation companies operating in Indonesia, the same number as in the previous year. However, when compared to previous years, the number of coffee plantation companies in Indonesia has decreased. In 2018, there were still 94 coffee plantation companies, but this number dropped to 89 in 2019 and 82 in 2020.

This data indicates that while Indonesia's coffee industry continues to grow in terms of production and export, there are challenges in maintaining the number of coffee plantation companies in the country. ()