Robusta Coffee Prices Could Get Further Boost From El Niño

Indonesia’s robusta coffee production could be headed for another lackluster year as hot and dry conditions resulting from El Niño threaten to weaken the 2024 crop and drive up prices. 

Robusta coffee futures prices are currently at the highest levels seen in nearly a decade, as this Gro display shows. By contrast, prices for Arabica coffee, mostly grown in Brazil, are down sharply from last year’s peaks. Indonesia is the third-largest producer of robusta beans, after Vietnam and Brazil. 

Coffee crops are highly susceptible to weather volatility. Indonesia’s 2023 robusta crop, which was just harvested, was damaged when excessive rains in April and May disrupted the cherry development. This caused the country’s recent harvest to decline by 20% to its lowest in more than a decade, as seen in this Gro display. 

Currently, precipitation in Indonesia’s coffee-growing areas is well below average, and soil moisture readings are at their lowest in 20 years, according to Gro’s Climate Risk Navigator for Agriculture. As El Niño ramps up, hotter and drier conditions are expected to settle into the region late this year and linger into early 2024, overlapping with the robusta crop’s crucial flowering period. 

The strong El Niño event that hit in 2015-16 brought the second-highest drought levels in Indonesia’s coffee-growing regions for the last 20 years, according to Gro’s Drought Index. The 2016 robusta production in the country fell by 12% as a result.

El Niño also is predicted to reduce 2024 palm oil yields in Indonesia and neighboring Malaysia, the world’s No. 1 and 2 producers of the popular edible oil. Australia’s wheat harvest also is projected to be down by double digits as a result of El Niño. 

Robusta beans account for 40% of global coffee production. Arabica beans, which make up the remaining 60%, are usually deemed to be of higher quality and command higher prices than robusta coffee. 

Vietnam, the world’s No. 1 robusta producer, could also see 2024 production impacted, as the country tends to see higher temperatures and reduced rainfall during El Niño events. Brazil’s 2023 robusta crop, currently being harvested, also is projected to be down year over year as below-average rain early in the season stunted coffee cherry development.   

More than half of Indonesia’s total coffee area is located in Sumatra. Arabica crops dominate in northern Sumatra and some mountainous areas in Java, while robusta is grown mostly in southern Sumatra and lower lands in Java.