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Some of Asia\u2019s biggest coffee-producing nations are finding it more challenging to satisfy the caffeine cravings in their home markets.<\/p>\n
From the streets of Ho Chi Minh City to the cafes of Jakarta, consumers are rapidly developing a taste for coffee, and that\u2019s transforming Asian producers into large buyers. While Vietnam and Indonesia still rank as major shippers, they are increasingly sourcing coffee from agriculture powerhouse Brazil to meet the consumption boom.<\/p>\n
\u201cIt\u2019s pretty remarkable how people love their coffee,\u201d consultant\u00a0Judy Ganes\u00a0said, referring to Indonesia\u2019s thriving cafe culture. Innovative drinks such as a coffee-avocado mix have enticed new consumers \u2014 part of a growing movement across Asia as increases in disposable income foster coffee consumption, she added.<\/p>\n
Both Indonesia and Vietnam, big growers of the bitter robusta variety favored to make espresso and instant drinks, prefer to export their coffee production while importing for domestic consumption \u2014 their own beans are more expensive than Brazil\u2019s. Coffee\u2019s cool factor at home is a good indication that the imports will continue, especially after extreme weather and insufficient yields over the past years have weighed on global\u00a0production.<\/p>\n
The world\u2019s largest coffee trader,\u00a0Neumann Kaffee Gruppe<\/a>, is betting on the shift, opening an\u00a0import office<\/a>\u00a0in Indonesia as it expects demand there will eventually be higher than what the nation\u2019s crops will be able to handle.<\/p>\n Indonesian coffee consumption grew about 4% annually over the past decade, according to the local exporters association. That\u2019s higher than the 2.2% growth in global demand expected this year by the\u00a0International Coffee Organization<\/a>, following a period of ups and downs during the pandemic era.<\/p>\n Shipments from Brazil to Indonesia, the world\u2019s fourth-largest producer, more than doubled last year, according to\u00a0Cecaf\u00e9<\/a>. \u201cThe potential for growth is still very large, especially because consumption per capita is lower than in other parts of the world,\u201d said\u00a0M\u00e1rcio Ferreira, chairman of the exporters group.<\/p>\n As coffee-drinking habits flourish, Indonesia\u2019s bean\u00a0production\u00a0has mostly stalled. Demand may exceed output within the next five to eight years if the same pace continues, said\u00a0Moelyono Soesilo, head of downstream coffee industry at the Association of Indonesian Coffee Exporters and Industries.<\/p>\n The group is seeking to help farmers manage their estates, looking to boost yields above the current level of 1.1 metric tons per hectare. In comparison, areas that produce a similar coffee variety in Brazil have yields of about 2.5 tons per hectare, according to crop agency\u00a0Conab<\/a>.<\/p>\n Meanwhile, shipments from Brazil to Vietnam are also surging \u2014 jumping more than sixfold in the 12 months ended in January, Cecaf\u00e9 reported.<\/p>\n Imports from the South American country are serving Vietnam\u2019s instant coffee industry, said\u00a0Trinh Duc Minh<\/a>, head of the Buon Ma Thuot Coffee Association in Dak Lak province. Some companies have imported beans to honor signed contracts and make roasted coffee as well, said Tran Thi Lan Anh, deputy director of second-largest exporter\u00a0Vinh Hiep Co.<\/a><\/p>\n Weather is helping bring more imports to the region. The El Ni\u00f1o phenomenon has brought extreme dryness to Southeast Asia this season, reducing production in Vietnam and Indonesia and causing a spike in local prices. Vietnam coffee is currently trading at more than a $30 premium to Brazilian beans, making South American purchases even more attractive.<\/p>\n \u201cIt\u2019s tough to get beans these days\u201d despite the higher prices, Anh said, suggesting there are probably not many beans left in farmers\u2019 hands.<\/p>\n While Vietnam is the world\u2019s largest supplier of robusta,\u00a0extreme weather<\/a>\u00a0and years of low profits prior to last year\u2019s price surge led some farmers to switch to\u00a0other crops<\/a>. The country\u2019s share of the global market has gradually shrunk over the last decade \u2014 it\u2019s now at the smallest since 2008, risk management firm\u00a0Hedgepoint Global Markets<\/a>\u00a0estimates.<\/p>\n Some recovery is expected in both Vietnam and Indonesia\u2019s coffee supply, as higher prices will bring higher revenue to farmers, spurring them to invest in expanding and improving their crops.<\/p>\n Still, long-term challenges will persist, said\u00a0Carlos Costa<\/a>, Hedgepoint head of sales. \u201cThe amount of small, family properties makes it more difficult to see gains of scale,\u201d he said. \u201cThe big alternative to come onto the market should be Brazil.\u201d<\/p>\n<\/div>\n