Indonesia’s coffee producers and farmers are calling for help financially, recommending an off-take process, to ease the Covid-19 pandemic effects on demand for upstream coffee. Some 400 tons of coffee are being held under a warehouse receipt, 150 tons of which have yet to be sold.
A system enables farmers to deposit their harvest in a warehouse as collateral for a loan, and receive a warehouse receipt.
Farmers are struggling. They need to sell their produce, but the offered price is too low. During a webinar hosted by the Cooperatives and Small and Medium Enterprises (SME) Ministry, exporters are also experiencing difficulty as there are no buyers. They believe financing institutions should serve as an off-taker.
According to Statistics Indonesia (BPS), data shows Indonesia, the world’s fourth-largest coffee producer, saw its household spending contract by 5.51 percent year-on-year in this year’s second quarter as the economy shrank by 5.32 percent. Households spending less has impacted coffee consumption.
Despite the pandemic, International Coffee Organization (ICO) data shows that Indonesia’s coffee exports grew by 1.1 percent year-on-year to 668,000 60-kilogram bags in July this year. however, the statistics have yet to represent the disruptions experienced within the country’s coffee supply chain, as government officials have acknowledged the need to finance the local coffee industry better during the disruption.
The president has instructed the Cooperatives and SME Minister to find ways to carry these agricultural products, as they have yet to be fully absorbed by the domestic and export market.
The ministry is preparing multiple financing schemes to accelerate this absorption, including financing for cooperatives that collect the coffee and link it to off-takers. The schemes have been endorsed by acting Aceh Governor – Nova Iriansyah.
Nova said, there needs to be support for cooperatives that export coffee in the form of cheap financing to increase their purchasing power during the harvest season. He added that 70 percent of the coffee harvest in Aceh would occur between the end of September of this year and January 2021. An estimated 52,000 tons of beans will be harvested during the period.
Finance organisations have chipped in to ease the financial burdens of coffee farmers and cooperatives.
State-owned Bank Rakyat Indonesia (BRI) small, retail and medium business director Priyastomo said the bank had been supporting the country’s coffee industry, through the warehouse receipt subsidy scheme, among other initiatives.
The bank is offering an interest rate of 6 percent to farmers, farmer associations and cooperatives that use the warehouse receipt system as collateral. The additional 5.25 percent interest is subsidised by the government.
The warehouse receipt is a government program that aims to support the continuity of production and sustainability in terms of agricultural product prices.
