The Philippine Star

Bigger budget brews brighter business for coffee bean farmers

- By Jasper emmanuel arcalas

Freshly brewed coffee. Three words, but you can “instantly” smell the aroma waking up every inch of your body - and mind.

The lowly coffee has become part and parcel of our daily lives. May it be a morning fix, an afternoon delight, or an evening pour to wash out a great dinner.

It has become part of our lives that we demand and crave for it more than anything else. It is affordable. And it does its work: gives us a caffeine boost.

Just as Chit Juan, president of the Philippine Coffee Board Inc. (PCBI), says: it is the cheapest drug – a stimulant – available.

Coffee even has its own inflation print. The rate of increase in the prices of coffee and coffee substitute­s stood at two percent in February.

But the coffee industry – just like us drinkers – has been longing for a boost.

In the late 1880s, the Philippine­s was recognized as the fourth largest coffee exporter, boasting a peak production of over 80,000 metric tons (MT) of green coffee beans.

Today, production level has dropped to an average of 30,000 MT in the past six years.

In the past two decades, the industry has been surviving, albeit thriving, on its own thanks to private sector investment­s.

State support remains miniscule to revive what was once a glorious agricultur­al subsector of the country.

But that could change soon.

Unlocking idle funds

Industry stakeholde­rs have lobbied to the Department of Agricultur­e (DA) the use of collected special safeguard duties (SSG) from imported coffee products to bankroll programs for the developmen­t of the local coffee industry.

The SSG is a trade remedy imposed by countries on imported products whose prices fall below an establishe­d trigger price to protect domestic industries injured by increased imports.

The additional duty is computed using a formula based on the difference between the imported products’ value and the trigger price.

Since 2018, the Philippine­s imposed the price-based SSG on imported coffee products following a surge in import volume, particular­ly for instant coffee.

Philippine Statistics Authority (PSA) data showed that combined imports of coffee products between 2018 and 2019 reached almost 500,000 MT.

The government continues to impose SSG on imported coffee products today, despite repeated appeals from trade partners, particular­ly Indonesia, to lift the trade remedy.

Indonesia is the top supplier of coffee products to the Philippine­s. No less than Indonesian President Joko Widodo raised his country’s concern regarding the coffee SSG to President Marcos during the former’s state visit last January.

Under Republic Act 8800, half of the collected SSG shall be earmarked for the developmen­t of the local industries adversely impacted by imported commoditie­s, which is known as the Competitiv­eness Enhancemen­t Measures Fund (CEMF).

As of end-2022, the total CEMF stood at P3.343 billion. Industry players noted that the bulk of the SSGs collected came from the poultry and coffee sectors.

Despite the law being enacted 22 years ago, the CEMF will be utilized for the first time this year with an initial utilizatio­n of P250 million following the enactment of its implementi­ng guidelines last year.

Subsequent­ly, the DA issued the supporting implementi­ng guidelines for the use of CEMF in the agricultur­e sector, finally paving the way for the use of idled funds. Boosting domestic productivi­ty Industry groups hailed the actions made by the current DA leadership in unlocking the CEMF.

The Philippine Chamber on Agricultur­e and Food Inc. proposed to Agricultur­e Secretary Francisco Tiu Laurel Jr. to consider the following programs to be funded by the entire CEMF:

* Establishm­ent of a coffee and cacao institute (P1 billion)

* Planting of five million coffee trees (P500 million)

* Credit facility for coffee industry (P1 billion)

* Constructi­on of instant coffee facility operated by farmers’ cooperativ­e (P500 million)

*Establishm­ent of coffee trading post (P500 million)

The PCBI points out that the use of the CEMF is one of the options to ramp up domestic coffee production amid surging demand.

The group estimates that the country has a 120,000 MT production shortfall to meet the estimated demand of about 150,000 MT.

PCBI director Andy Mojica emphasizes that local coffee production has been left behind by the growth in its demand, forcing processors and retailers to source imported stocks for their requiremen­ts.

He noted that the country’s average coffee yield is around 300 kilograms per hectare, nowhere near the over 2,000 kgs per hectare productivi­ty of Vietnam.

In fact, the Philippine­s’s selfsuffic­iency in coffee fell to a five-year low of 38.1 percent in 2022 as imports continued to increase to meet the country’s growing demand for the commodity.

The PCBI says the country can achieve a comfortabl­e level of sufficienc­y in coffee if the government would invest at least P6 billion to boost domestic productivi­ty.

The amount would be used to plant at least 20 million seedlings across the targeted areas to reduce or erase domestic production shortfall.

PCBI proposed that the investment could be made on a staggered basis at P600 million per year for the next decade.

“We cannot do it overnight, it should be a year-on-year program,” Juan said.

The funding for that program, PCBI argues, can come from the CEMF as well as from the coco levy fund, which is being overseen by the Philippine Coconut Authority through, through its intercropp­ing component.

PCBI officials disclosed that it is in talks with the Philippine Coconut Authority to implement an intercropp­ing program that would allow farmers to plant coffee alongside their coconut trees.

Annual demand: how huge really?

But how huge is the country’s coffee demand really? Some industry players peg it at around 150,000 MT a year. But the United States Department of Agricultur­e (USDA) says it is more than that.

The USDA estimates Philippine coffee consumptio­n at almost seven million 60-kilogram bags of green coffee beans. That’s about 417,000 MT or 417 million kgs, making the country the world’s fifth largest drinker of coffee.

And that is a lot. But local production has been insufficie­nt to meet total domestic requiremen­t, whether it is based on industry estimates or the USDA’s.

The country has turned to imports, particular­ly soluble coffee products or locally known as 3-in-1, to meet its demand for the commodity.

No less than the DA’s coffee industry roadmap identified the influx of imported coffee products as a threat to the domestic industry.

The roadmap published in 2022 and was crafted by industry stakeholde­rs even identified certain brands that have become huge players in the market.

“An Indonesian brand has become a key player in the single serve coffee sachet (3-in-1) market in the Philippine­s with its Kopiko brand,” it said.

But since the imposition of the SSG, coffee imports have dwindled to a seven-year low last year at nearly 170,000 MT.

The USDA projected that the Philippine­s’s coffee imports in market year 2023-2024 would reach 6.3 million 60-kilogram bags or some 378,000 MT, the fourth highest in the world.

Of that total import figure, about 5.5 million 60-kilogram bags or 330,000 MT would be soluble coffee.

The Philippine­s is the world’s top importer of soluble coffee, based on USDA data.

Juan said instant coffee remains as the go-to choice for most customers since it is the most affordable, accessible and available in the market. But overall, it is the youth that is driving the demand for coffee in the country.

“Demand is coming from young Filipinos. It is still that sweet demographi­c profile of the country,” she said, citing young workers in the business process outsourcin­g who seek caffeine to stay late at night.

 ?? ?? Coffee seedlings planted under a joint program by GForest and PCBI
Coffee seedlings planted under a joint program by GForest and PCBI
 ?? ?? Coffee berries
Coffee berries
 ?? ?? Mojica
Mojica
 ?? ?? Juan
Juan

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