1 00:00:00,080 --> 00:00:02,880 Speaker 1: There's something brewing in the world of coffee, and it's 2 00:00:02,920 --> 00:00:06,880 Speaker 1: not good. Indonesia, the country that includes the island of Java, 3 00:00:07,160 --> 00:00:11,520 Speaker 1: simply isn't making enough Java. It's being forced to import 4 00:00:11,560 --> 00:00:16,079 Speaker 1: the delicious and addictive beans from Vietnam and Brazil. What's 5 00:00:16,120 --> 00:00:20,120 Speaker 1: going on here? Chains like Starbucks are expanding in Asia 6 00:00:20,400 --> 00:00:25,200 Speaker 1: as the region becomes wealthier, and downtown Jakarta, the Indonesian capital, 7 00:00:25,480 --> 00:00:28,080 Speaker 1: has more than a few You might think this would 8 00:00:28,080 --> 00:00:40,760 Speaker 1: mean happy days on well Java, think again. Welcome to 9 00:00:40,760 --> 00:00:45,200 Speaker 1: Benchmark Show about the Global Economy. I'm Scott Landman, economics 10 00:00:45,280 --> 00:00:48,960 Speaker 1: editor with Bloomberg News and Washington. I'm joined by Daniel Moss, 11 00:00:49,080 --> 00:00:52,400 Speaker 1: economics writer and editor at Bloomberg View in New York. 12 00:00:52,760 --> 00:00:55,640 Speaker 1: Thanks Scott Noice to be with you, and just to 13 00:00:55,720 --> 00:00:59,440 Speaker 1: give listeners a sense of the historical significance of what's 14 00:00:59,480 --> 00:01:04,400 Speaker 1: happening here. The country now called Indonesia has deep historical 15 00:01:04,520 --> 00:01:08,520 Speaker 1: resonance in the coffee industry. The Dutch East India Company 16 00:01:08,640 --> 00:01:11,640 Speaker 1: was the first importer of coffee to Europe in any 17 00:01:11,720 --> 00:01:16,480 Speaker 1: meaningful way. Dutch colonists grew the crop in Java, and 18 00:01:16,560 --> 00:01:23,640 Speaker 1: production subsequently spread to Samatra and Sulawesi. Now. Undoing Java's 19 00:01:23,840 --> 00:01:29,200 Speaker 1: iconic status is a combination of climate change, plague, and 20 00:01:29,240 --> 00:01:34,039 Speaker 1: the evolving economic structure of coffee farms. All right, well, 21 00:01:34,120 --> 00:01:37,640 Speaker 1: Joining us now is Jamal Gawie, a climate change and 22 00:01:37,720 --> 00:01:42,839 Speaker 1: biodiversity consultant in Indonesia who recently authored an opinion article 23 00:01:42,959 --> 00:01:47,680 Speaker 1: in the Jakarta Post decrying the industry's demise. Jamal, welcome 24 00:01:47,720 --> 00:01:51,760 Speaker 1: to Benchmark. Thank you hi everybody. So let's just start off. 25 00:01:51,920 --> 00:01:55,520 Speaker 1: Tell us how serious is the challenge to coffee growing 26 00:01:55,600 --> 00:01:59,120 Speaker 1: in Indonesia. Of all places, as you already Masia e 27 00:01:59,240 --> 00:02:03,600 Speaker 1: Police in Asia is one of the country that produce 28 00:02:04,600 --> 00:02:09,560 Speaker 1: a lot of coffee, is the largest producer in the worlds. However, 29 00:02:10,480 --> 00:02:14,799 Speaker 1: recently a read the production of coffee Inuitia has been 30 00:02:14,840 --> 00:02:19,440 Speaker 1: declining in some areas, especially in Java for example, the 31 00:02:19,520 --> 00:02:25,040 Speaker 1: decline could reached twenty to and this is very serious. 32 00:02:25,080 --> 00:02:26,880 Speaker 1: So I tried to find out what is going on 33 00:02:27,000 --> 00:02:33,960 Speaker 1: with the coffee industry in Indonesia and also in other countries. Actually, 34 00:02:34,040 --> 00:02:37,639 Speaker 1: there are a number of vectors causing the production decline. 35 00:02:38,080 --> 00:02:42,399 Speaker 1: First and the most important things is climate change. Increased 36 00:02:42,440 --> 00:02:47,160 Speaker 1: temperatures and change of rainfall are responsible for reduction in 37 00:02:47,320 --> 00:02:53,400 Speaker 1: coffee production. The related phenomena including long drought months and 38 00:02:53,639 --> 00:02:58,840 Speaker 1: less web man accompanied by pass udbrey a common education 39 00:02:58,960 --> 00:03:02,280 Speaker 1: of the crisis and the arabic Ca caffee. This is 40 00:03:02,320 --> 00:03:05,960 Speaker 1: the premium caffee. The arabic Ca caffee plant response sessively 41 00:03:06,040 --> 00:03:11,360 Speaker 1: sensitively to increasing temperature, especially during the blashoming and factification. 42 00:03:12,080 --> 00:03:16,680 Speaker 1: Along the similar line, increased temperature will have false farmers 43 00:03:16,760 --> 00:03:20,400 Speaker 1: to go to higher attitude to start new caffee plantation. 44 00:03:21,440 --> 00:03:25,240 Speaker 1: The problem is at the higher altitude, most of the 45 00:03:25,320 --> 00:03:30,320 Speaker 1: land are at the steep slop and land availability is 46 00:03:30,400 --> 00:03:35,000 Speaker 1: limited because most of the land have been dedicated for 47 00:03:35,360 --> 00:03:41,120 Speaker 1: protection forests or protected area. So in appropriate plentying tennique 48 00:03:41,520 --> 00:03:46,120 Speaker 1: in the steep slope and clearing the forest for coffee 49 00:03:46,120 --> 00:03:51,200 Speaker 1: plantation we also cause serious incremental issues and if an tumal. 50 00:03:51,280 --> 00:03:54,840 Speaker 1: I'm struggling with how this can be happening. One of 51 00:03:54,880 --> 00:03:59,920 Speaker 1: the big economic narratives of the past hundred years has 52 00:04:00,160 --> 00:04:03,800 Speaker 1: been the rise of the Asian consumer. Pretty much the 53 00:04:03,880 --> 00:04:06,920 Speaker 1: last thing I saw when I left Jakater Airport a 54 00:04:06,960 --> 00:04:11,920 Speaker 1: few weeks ago, for example, was a Starbucks. So how 55 00:04:11,960 --> 00:04:17,440 Speaker 1: can you reconcile a crisis in coffee production. With a 56 00:04:17,520 --> 00:04:20,560 Speaker 1: lot of demand for coffee, surely it should be a 57 00:04:20,600 --> 00:04:25,320 Speaker 1: boom time for coffee. So this is happening not only 58 00:04:25,360 --> 00:04:30,600 Speaker 1: in Asia. The coffee production actually declaiming, what the demon 59 00:04:31,480 --> 00:04:36,800 Speaker 1: is increasing. So how can we supply the market with coffee? 60 00:04:37,080 --> 00:04:39,960 Speaker 1: The first thing with happening in Autia is by importing 61 00:04:39,960 --> 00:04:43,720 Speaker 1: coffee from Brazil. And yet now this is just to 62 00:04:43,880 --> 00:04:51,599 Speaker 1: feed the market. That seems like Saudi Arabia importing oil, Yes, 63 00:04:52,360 --> 00:04:56,000 Speaker 1: something like that. Yeah. The reason for this because the 64 00:04:56,040 --> 00:04:59,320 Speaker 1: production in Autia is declaiming while at the same time 65 00:04:59,480 --> 00:05:03,159 Speaker 1: the dem and is increasing. So how to to deal 66 00:05:03,200 --> 00:05:07,040 Speaker 1: with that is by importing the coffee being from other countries. 67 00:05:07,440 --> 00:05:12,040 Speaker 1: So Jamal, you mentioned climate change as a principal culprit 68 00:05:12,480 --> 00:05:16,599 Speaker 1: in this challenge to production of coffee Indonesia, But is 69 00:05:16,640 --> 00:05:21,520 Speaker 1: there anything else say about the economic structure of coffee 70 00:05:21,560 --> 00:05:26,600 Speaker 1: farms in Indonesia that's also part of this issue. Yeah. 71 00:05:26,760 --> 00:05:31,000 Speaker 1: Other factors that also causing the declining of coffee production 72 00:05:31,600 --> 00:05:35,920 Speaker 1: is the the management of the production itself in Indonesia 73 00:05:35,960 --> 00:05:39,920 Speaker 1: and some other Asian countries excluding Vietnam, because Vietnam has 74 00:05:39,920 --> 00:05:43,840 Speaker 1: a very efficient system. Right now, the production management is 75 00:05:43,880 --> 00:05:48,640 Speaker 1: still not very optimal. For example, many old non productive 76 00:05:48,680 --> 00:05:51,640 Speaker 1: coffee trees are still maintained by farmers, so this is 77 00:05:51,680 --> 00:05:56,120 Speaker 1: also posting the decline in production. So this is another 78 00:05:56,240 --> 00:05:58,839 Speaker 1: aspect of that. So there are a number of factors 79 00:05:58,839 --> 00:06:03,480 Speaker 1: actually hosting this decline of production. You mentioned about the 80 00:06:04,400 --> 00:06:09,520 Speaker 1: structure of the caffee farm. Yeah, when talking about the 81 00:06:09,520 --> 00:06:13,480 Speaker 1: the economic structure of the caffee farming, we should also 82 00:06:13,560 --> 00:06:18,240 Speaker 1: talk about all actors involved in the famuchines of caffee production. 83 00:06:18,760 --> 00:06:21,960 Speaker 1: The one who produced coffee being are mostly small holder 84 00:06:22,120 --> 00:06:26,880 Speaker 1: caffee farmers. Around n all coffee producers indoor is small 85 00:06:26,880 --> 00:06:30,800 Speaker 1: holder caffee fomers. So the first one affected by climate 86 00:06:30,880 --> 00:06:34,960 Speaker 1: change are these farmers. The problem is in many cases 87 00:06:35,560 --> 00:06:40,320 Speaker 1: they have been treated unfairly by the market because the 88 00:06:40,320 --> 00:06:44,280 Speaker 1: market prices that's not really account for the many reasons 89 00:06:44,400 --> 00:06:47,039 Speaker 1: that the farmers should take in producing coffee being in 90 00:06:47,120 --> 00:06:50,880 Speaker 1: the age of the climate change. These trees includes for example, 91 00:06:51,240 --> 00:06:56,800 Speaker 1: decreasing of coffee being quality, increased production costs due to 92 00:06:56,839 --> 00:07:00,560 Speaker 1: the need for higher input. This is some of the 93 00:07:00,560 --> 00:07:04,000 Speaker 1: the risk. Yeah. So in my opinion, in order to 94 00:07:04,120 --> 00:07:07,640 Speaker 1: reverse this treation and make it fair to the small 95 00:07:07,680 --> 00:07:12,360 Speaker 1: holder farmers, the markets and all actors involved in the market, 96 00:07:12,760 --> 00:07:17,679 Speaker 1: including big and small buyers and also consumers should also 97 00:07:17,680 --> 00:07:21,120 Speaker 1: account for the reason the farmer will have to make 98 00:07:21,200 --> 00:07:25,680 Speaker 1: to produce their coffee berries, Jamal, If we understand you correctly, 99 00:07:26,440 --> 00:07:31,080 Speaker 1: people are clearing forests to make more room to grow coffee, 100 00:07:31,400 --> 00:07:37,920 Speaker 1: but that deforestation is setting and trained dynamics which ultimately 101 00:07:38,240 --> 00:07:42,600 Speaker 1: destroy the crop. Yes, you can see that because what 102 00:07:42,880 --> 00:07:45,600 Speaker 1: is going on right now. When the farmer tried to 103 00:07:45,640 --> 00:07:49,520 Speaker 1: find a new land to plan their coffee plantations, they 104 00:07:49,560 --> 00:07:54,320 Speaker 1: will go to a higher ground, to higher altitude, and 105 00:07:54,760 --> 00:07:59,200 Speaker 1: these higher altitude places are mostly steeped through area or 106 00:07:59,240 --> 00:08:03,920 Speaker 1: montinis there. So when they clear the partiest there first, 107 00:08:04,200 --> 00:08:06,720 Speaker 1: they also break the law because it's protected area and 108 00:08:06,720 --> 00:08:11,120 Speaker 1: they cannot do that any second. It also costs another 109 00:08:11,560 --> 00:08:16,120 Speaker 1: serious impromental issues like in Rossia landslide and also will 110 00:08:16,200 --> 00:08:18,920 Speaker 1: cause flooding to the lower level and at the end 111 00:08:18,960 --> 00:08:24,480 Speaker 1: it will also destroy their their problems. So let's hope 112 00:08:24,520 --> 00:08:31,000 Speaker 1: to see displasia. Let's talk about the Asian consumer now here. 113 00:08:31,760 --> 00:08:36,280 Speaker 1: Coffee in Asia, especially at places like Starbucks or other 114 00:08:36,440 --> 00:08:42,000 Speaker 1: upscale chains, is not something that's a very cheap commodity. 115 00:08:42,440 --> 00:08:46,839 Speaker 1: Is there a price at which these kinds of issues continue, 116 00:08:47,440 --> 00:08:49,480 Speaker 1: you know, and the price of coffee may go up 117 00:08:49,559 --> 00:08:53,079 Speaker 1: over time. Is there a higher price at which the 118 00:08:53,120 --> 00:08:58,000 Speaker 1: consumer in Jakarta might not want to buy his or 119 00:08:58,000 --> 00:09:03,240 Speaker 1: her regular coffee the station right now? As we discussed before, 120 00:09:03,520 --> 00:09:08,319 Speaker 1: actually there are more and more people drinking coffee. They 121 00:09:08,400 --> 00:09:13,800 Speaker 1: love coffee, especially the younger, younger generation, especially in in 122 00:09:13,960 --> 00:09:17,800 Speaker 1: bi small cities in Asia. It seemed to me right now, 123 00:09:17,840 --> 00:09:21,040 Speaker 1: whatever the price, they will buy because you see, like 124 00:09:21,280 --> 00:09:27,600 Speaker 1: drinking coffee has become what you call it, it's trendy. Trendy. Yes, 125 00:09:28,080 --> 00:09:30,480 Speaker 1: when you're in your car type you go to start 126 00:09:30,559 --> 00:09:34,440 Speaker 1: back or at the brand coffee shop, you will see 127 00:09:34,520 --> 00:09:37,920 Speaker 1: many young people are walking there. So it's it's a trend. 128 00:09:38,480 --> 00:09:41,320 Speaker 1: So people start to love coffee. And I have seen 129 00:09:41,360 --> 00:09:43,439 Speaker 1: this I straight for a lot in Eusia, in small 130 00:09:43,480 --> 00:09:46,640 Speaker 1: and big cities. I'm surprised to see that there are 131 00:09:46,640 --> 00:09:50,280 Speaker 1: many coffee shop right now all of Idunsia. So this 132 00:09:50,400 --> 00:09:54,280 Speaker 1: is a trendy. So Tamal, even if the price doubled 133 00:09:54,960 --> 00:09:58,000 Speaker 1: or tripled, do you think people would still buy this 134 00:09:58,200 --> 00:10:00,360 Speaker 1: much coffee or do you think you know it would 135 00:10:00,360 --> 00:10:03,360 Speaker 1: be some declined in to man. Of course, you know, 136 00:10:04,000 --> 00:10:08,720 Speaker 1: if you followed the economic law, when the press increased 137 00:10:08,760 --> 00:10:11,280 Speaker 1: too much, that there will be a certain point where 138 00:10:11,320 --> 00:10:17,880 Speaker 1: people will not stop but reduced consuming a coffee. There 139 00:10:17,960 --> 00:10:20,280 Speaker 1: is a strong possibility for that, but it's difficult for 140 00:10:20,320 --> 00:10:22,600 Speaker 1: me to answer where there's double or triple the price, 141 00:10:22,679 --> 00:10:24,800 Speaker 1: you know, but what I can see right now is 142 00:10:25,200 --> 00:10:30,320 Speaker 1: even starbuck is quite expensive. But I'm surprised to see 143 00:10:30,320 --> 00:10:36,600 Speaker 1: that this. You know, millennium generation young people, they keep 144 00:10:36,920 --> 00:10:42,559 Speaker 1: coming back to start back. What happens if things continue 145 00:10:42,760 --> 00:10:47,599 Speaker 1: on their present course? What happens to the coffee industry 146 00:10:47,720 --> 00:10:53,040 Speaker 1: if we can't address these problems in Java, which as 147 00:10:53,040 --> 00:10:56,840 Speaker 1: I said earlier, sounds like the Saudi Arabia of coffee. 148 00:10:56,880 --> 00:11:01,360 Speaker 1: If we can't get it right there, what are the implications? 149 00:11:01,760 --> 00:11:07,400 Speaker 1: There are some implications, not one the first implication, of course, 150 00:11:07,480 --> 00:11:12,040 Speaker 1: with the decrease of production, the press will go up. 151 00:11:12,440 --> 00:11:17,320 Speaker 1: And then the second, if this climate change continue affecting 152 00:11:17,360 --> 00:11:23,080 Speaker 1: the coffee plantation, we will start losing the character of 153 00:11:22,520 --> 00:11:26,719 Speaker 1: the real coffee because the taste is changing already right now. 154 00:11:27,040 --> 00:11:29,760 Speaker 1: And this is serious because, for example, where the bios 155 00:11:29,800 --> 00:11:33,200 Speaker 1: would like to buy the the specialty coffee let's see 156 00:11:33,240 --> 00:11:37,160 Speaker 1: from the highlands of Gayo in they are asking questions 157 00:11:37,200 --> 00:11:40,080 Speaker 1: right now whether the farmlers in Gio are selling the 158 00:11:40,160 --> 00:11:43,120 Speaker 1: right coffee to them because the character of the coffee 159 00:11:43,120 --> 00:11:46,760 Speaker 1: are changing. And Jamal, just for our listeners, when you 160 00:11:46,840 --> 00:11:50,760 Speaker 1: say Arch, we are talking about a province at the 161 00:11:50,800 --> 00:11:55,240 Speaker 1: western tip of Sumatra, Yes, exactly. Yeah, this is uh 162 00:11:55,880 --> 00:11:58,240 Speaker 1: the home of one of the best coffee in the 163 00:11:58,240 --> 00:12:02,080 Speaker 1: worlds Gario Arabica Arabic a coffee. Yeah. So that is 164 00:12:02,080 --> 00:12:05,080 Speaker 1: what going on right now. So climate change is not 165 00:12:05,360 --> 00:12:11,960 Speaker 1: only affect the production, meaning decreasing the production, planning the production, 166 00:12:12,240 --> 00:12:14,880 Speaker 1: but it also affects the taste of the coffee. We 167 00:12:15,200 --> 00:12:18,880 Speaker 1: have to expect losing the good taste of Arabican coffee 168 00:12:18,880 --> 00:12:23,320 Speaker 1: from Vario because of climate change. Is it possible, if 169 00:12:23,360 --> 00:12:28,359 Speaker 1: we continue on this course that inside ten or fifteen years, 170 00:12:28,520 --> 00:12:33,480 Speaker 1: coffee could taste completely different from how coffee tastes now. Yes, 171 00:12:33,720 --> 00:12:35,920 Speaker 1: you can see that, and it is happening right now 172 00:12:36,480 --> 00:12:39,880 Speaker 1: because the way the buyers or people involved in this 173 00:12:40,000 --> 00:12:42,920 Speaker 1: coffee industry, they have a certain way to great coffee. 174 00:12:43,679 --> 00:12:46,880 Speaker 1: There are at least like what ten or more characters 175 00:12:47,000 --> 00:12:50,520 Speaker 1: they use. Yeah, and it is changing right now. That's 176 00:12:50,559 --> 00:12:53,160 Speaker 1: what I can see. Yeah, based on my estradio in 177 00:12:53,200 --> 00:12:56,120 Speaker 1: the field, Well, I can say that we will always 178 00:12:56,280 --> 00:12:59,319 Speaker 1: be looking back on the good old days of coffee, 179 00:12:59,360 --> 00:13:02,240 Speaker 1: I'm sure and a few years Jamal goee. Thank you 180 00:13:02,280 --> 00:13:22,600 Speaker 1: so much for taking the time to be with us today. So, Dan, 181 00:13:22,720 --> 00:13:25,400 Speaker 1: what's your big takeaway from all this? It's interesting the 182 00:13:25,400 --> 00:13:29,160 Speaker 1: way our conversation with Jamal developed. We began with an 183 00:13:29,240 --> 00:13:34,520 Speaker 1: overall macro idea that Indonesia, kind of the Saudi Arabia 184 00:13:34,559 --> 00:13:38,240 Speaker 1: of coffee, was having a problem, and we ended up 185 00:13:38,320 --> 00:13:42,280 Speaker 1: with how wait a minute, these forces could mean that 186 00:13:42,320 --> 00:13:45,680 Speaker 1: your coffee in a couple of years might not actually 187 00:13:45,720 --> 00:13:50,920 Speaker 1: taste like coffee. Climate change in economics are changing the 188 00:13:50,960 --> 00:13:54,400 Speaker 1: way a hot commodity actually tastes. And yet, like a 189 00:13:54,400 --> 00:13:56,719 Speaker 1: lot of things in economics, I think it's going to 190 00:13:56,800 --> 00:13:58,320 Speaker 1: be a little slower. I think it's going to be 191 00:13:58,320 --> 00:14:01,400 Speaker 1: one of those slow move being kind of things where 192 00:14:01,720 --> 00:14:03,920 Speaker 1: you don't really notice it. Maybe your coffee will change 193 00:14:03,960 --> 00:14:06,319 Speaker 1: slightly from year to year, and then you know, ten 194 00:14:06,400 --> 00:14:08,199 Speaker 1: or fifteen years from now, we're going to be sitting 195 00:14:08,200 --> 00:14:11,360 Speaker 1: around and talking about how poorly are coffee tastes and 196 00:14:11,440 --> 00:14:14,520 Speaker 1: thinking about, well, maybe it really was that good in 197 00:14:14,559 --> 00:14:17,480 Speaker 1: the good old days, and all those coffee stools that 198 00:14:17,520 --> 00:14:20,200 Speaker 1: have job are in their name might have to change 199 00:14:20,720 --> 00:14:25,600 Speaker 1: or it'll just be a taste of nostalgia. Benchmark will 200 00:14:25,640 --> 00:14:27,800 Speaker 1: be back next week. Until then, you can find us 201 00:14:27,800 --> 00:14:30,680 Speaker 1: on the Bloomberg terminal, Bloomberg dot com, or Bloomberg App, 202 00:14:30,720 --> 00:14:34,080 Speaker 1: as well as wherever you listen to podcasts, including Apple Podcast, 203 00:14:34,240 --> 00:14:37,160 Speaker 1: Overcast and Stitcher. While you're there, please take the time 204 00:14:37,200 --> 00:14:39,440 Speaker 1: to rate and review the show, and you can also 205 00:14:39,480 --> 00:14:42,040 Speaker 1: find us on Twitter. You can follow me at at 206 00:14:42,240 --> 00:14:47,800 Speaker 1: scott Landman Dan you are at moss Underscore Echo. Benchmark 207 00:14:47,920 --> 00:14:51,080 Speaker 1: is produced by Tofur Foreheads ahead of Bloomberg. Podcast is 208 00:14:51,080 --> 00:15:00,200 Speaker 1: Francesca Levy. Thanks for listening, See you next time. I 209 00:15:01,400 --> 00:15:12,800 Speaker 1: Stay the Mahanta, the sunder Barker and my fingers Apoll