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Government Intervention Needed to Improve Coffee Production

by PNG Business News - April 21, 2021

Lack of immediate government intervention to address a dramatic drop in coffee exports will have serious consequences for producers and the PNG economy that is very much dependent on it.

This is according to the release of a discussion paper by the Papua New Guinea National Research Institute (PNGNRI) that uses data based on various factors affecting coffee production in the five leading coffee producers of the world compared to PNG. The study draws lessons and makes recommendations to guide policy makers, government and Industry on strategies to improve production, quality and revenue for farmers, government, producers and stakeholders.

Titled ‘Strategies For Improving Coffee Production and Processing in Papua New Guinea: Lessons from the Top Five Coffee Producing Countries], it was researched and published by Carolyn A. Afolami and Eugene E. Ezebilo and released in March 2021.

The data (used in the discussion) were analysed using descriptive statistics and a log-log Ordinary Least Squares (OLS) regression model. Of the top five (05) Coffee-producing countries, Brazil had the largest area of coffee field harvested and the highest quantity of coffee produced. This is larger than the area harvested in PNG by 54 times and quantity produced by 36 times.

From 1998 to 2018, the coffee harvest area and quantity of coffee produced in PNG decreased by 33 percent and 28 percent respectively. Most of the coffee trees in PNG have passed their economic productive age. Coffee growers, especially smallholders, lacked access to extension services, and they find it difficult to access coffee processing facilities. OLS results revealed that an annual increase in the coffee harvest area increases the quantity of coffee produced. Coffee production in Vietnam and PNG are the most sensitive to changes in Arabica and Robusta coffee prices.

Extension services provided by the Coffee Industry Corporation (CIC) to PNG coffee farmers have not increased coffee production per hectare (yield). If the intention is to make PNG one of the top coffee-producing countries, strong ‘political will’ is needed to invest in research, effective extension services, and upskilling of coffee growers in modern coffee production and processing techniques.

In Papua New Guinea (PNG), coffee has been the second leading agricultural commodity, after oil palm (Department of Agriculture and Livestock [DAL], 2020). Coffee production provides opportunities for employment and foreign exchange earnings. Coffee contributed 27 percent of the total agricultural export from 2012 to 2017 and accounted for six (06) percent of the Gross Domestic Product (GDP) within the same period. It contributes to multiple sectors of PNG’s economy including transport, construction, manufacturing, retail and wholesale, insurance, and banking.

The PNGNRI Discussion Paper (No. 184) cites a report by AECOM (2018) on the PNG coffee market study, that reported that exports had dropped to 934 60kg bags between 1998 and 2018 while coffee price on the international market has also been declining over time. It (PNGNRI discussion paper) implies that, given that the two components of coffee revenue (output and price) to the producers is declining, revenue would decline over time and have serious consequences for everyone that depends on it.

If the intention is to make PNG one of the top coffee-producing countries, strong ‘political will’ is needed to invest in research, effective extension services, and upskilling of coffee growers in modern coffee production and processing techniques.

This is apart from other factors like access to markets, which is now the focus of the new World Bank funded program PNG Agriculture Commercialization and Diversification (PACD) program that continues on from the recently exited and successfully completed Public Private Agriculture Partnerships (PPAP) program.

In collaboration with the World Bank, the Government of PNG (GoPNG) implemented the PPAP as an initiative to make growing cash crops, like coffee, more attractive to farmers.

The Project focuses on improving performance in coffee production (DAL, 2020). This contributes to the GoPNG’s commitment to increase the contribution of cash crops — including coffee — to the country’s economy as highlighted in the Medium-Term Development Plan III (Department of National Planning and Monitoring, 2018).  PNG’s coffee industry provides one of the highest potentials for growth and gains within the agricultural sector and has the potential to support the growth of the economy.

However, the quantity and quality of coffee produced in PNG continue to decline, which threatens many households who depend on coffee for their livelihoods. The decline also adversely impacts government revenue from the agricultural sector. Because coffee contributes immensely to PNG’s economy and the livelihoods of many households, it is pertinent we find strategies to address the problems associated with the production and processing of coffee in the country.



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According to estimates from a survey, coffee production in the country has been decreasing for the past ten years. “From 1998 to 2018, the coffee harvest area and quantity of coffee produced in PNG decreased by 33 per cent and 28 per cent respectively,” a National Research Institute (NRI) report stated. The downturn was triggered by the problems that coffee growers face, such as a shortage of processing facilities, insufficient extension resources, and restricted access to finance. The problems could be resolved by the strategies suggested by NRI deputy director for research Prof Euegene Ezebilo and Prof Carolyn Afolami of the Federal University of Agriculture Abeokuta, based on the fact that “PNG has ideal environmental and climatic conditions for growing high-quality coffee.” They concluded in their paper, Strategies for improving coffee production and processing in PNG: Lessons from the top five coffee-producing countries, that the government's "political will" was critical in moving the coffee industry forward. “And this can be done by promoting effective extension services and training coffee growers on modern systems and innovations in producing coffee; provide funds for research and farm management practices; and, support farmers through loans facility at low-interest rates,” NRI said in a statement. “Policymakers, planners and agricultural managers are urged to take heed of the findings to make informed decisions on boosting the yield and quality of this commodity.”

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From 2012 to 2017, coffee accounted for 27% of total agricultural exports and 6% of the country's gross domestic product (GDP). It helped PNG's economy in a variety of ways, including transportation, construction, manufacturing, retail and wholesale, insurance, and banking. Arabica is a coffee species that is widely grown in PNG, mostly in the Highlands between 700 and 2,050 meters above sea level. Robusta is grown in coastal areas of PNG at elevations of up to 550 meters above sea level. PNG produces high-quality, fine-flavour Arabica coffee, which is highly sought after by coffee drinkers. Coffee production in PNG, on the other hand, seems to be decreasing. Between 1998 and 2018, according to a survey by AECOM (2018) on PNG coffee market research, exports fell to 934 60kg bags. In the foreign market, the price of coffee has also been falling over time. The implication is that, since the two components of coffee revenue (output and price) to producers are decreasing, the revenue would decline over time, resulting in significant consequences for the producers and the PNG economy. Results of study In Papua New Guinea, the annual area of coffee fields cultivated ranges from 41,000 hectares in 2002 to 87,000 hectares in 1999. In PNG, the area of coffee fields cultivated decreased by 33% from 81,000 hectares in 1998 to 54,000 hectares in 2018. When compared to the smallest area of coffee field harvest among the top five nations, PNG's largest harvested area (87,000 hectares) is 71% less than the smallest harvested area (220,000 hectares). The amount of coffee beans processed has decreased by 28% from 81,000 tonnes in 1998 to 58,000 tonnes in 2018. It's worth noting that there was no data available for 2008. Over the course of the research, PNG's annual coffee production was lower than that of the top five coffee-producing countries. Vietnam had the most coffee harvested per hectare of the top five coffee-producing countries. It jumped from 1,875 kg/ha in 1998 to 2,612 kg/ha in 2018, a 39 percent rise. Brazil harvested 816 kilograms per hectare in 1998 and 1,906 kilograms per hectare in 2018, a 134 per cent rise. Findings from a literature review on key challenges to coffee production and processing in Papua New Guinea The following are some of the obstacles to coffee production and processing in PNG: INADEQUATE access to basic infrastructure and facilities – Smallholder farmers, especially those in rural areas, struggle to find facilities for coffee milling and storage. There were no decent roads for transporting agricultural supplies and goods to and from their coffee fields. FARM management activities – Most coffee trees have reached the end of their economic sustainable life cycle, resulting in a decrease in crop yield. Producers postpone or fail to perform required coffee husbandry activities such as daily pruning and the planting of shade trees. REDUCED YIELD AND Uneven PRODUCT QUALITY – The quality of coffee produced in PNG is deteriorating. INADEQUATE extension services – Coffee farmers, especially smallholders, need education on modern coffee production methods. They, on the other hand, often find it impossible to obtain services from extension agents. TECHNOLOGY – Modern technology can help coffee farmers increase productivity and increase the appeal of their commodity. Coffee farmers in PNG, on the other hand, often lack modern technologies, which limits their ability to reach their full potential in the coffee industry. CHANGE IN CROPPING Trend – Due to a drop in coffee market prices or problems with access to coffee processing facilities, some coffee farmers turn all or part of their coffee fields to other more cost-effective crops. The turn to other crops may also be due to labour shortages for essential farm tasks including pruning coffee trees and picking coffee beans. PESTS and diseases – Other threats threatening coffee production include the coffee berry borer, coffee leaf rust, coffee green scale, and pink disease (DAL, 2020). UNFAVORABLE MARKET PRICES – The price paid to smallholder coffee farmers is often less than the rate paid to exporters. Smallholders are also discouraged from paying attention to required farm activities, which has an effect on coffee productivity. FINANCIAL ACCESS – Certain coffee farmers choose to grow their farm or buy coffee processing equipment. They, on the other hand, frequently have difficulty obtaining loans from commercial banks. ACCESS TO LAND FOR COMMERCIAL COFFEE PRODUCTION – A wide area of land is required for commercial coffee production to be productive, particularly in terms of economies of scale. Broad tracts of land with proper names, on the other hand, are often difficult to navigate. This is due to the fact that the state-owned property with proper titles is almost depleted. Communal-owned property, which accounts for nearly 97 per cent of total land in PNG, lacks proper titles; and SECURITY issues – Theft of coffee goods, particularly in rural areas, is a major concern for farmers and raises production costs and losses. Discussion The results of this study revealed that PNG has the potential to become one of the world's leading coffee producers. The country's climatic and environmental conditions are ideal for growing a variety of coffee varieties, giving it an advantage over some of the world's top coffee producers. This may explain why, according to the study, PNG had a higher average coffee yield per hectare than all of the top five coffee-producing countries except Vietnam. However, the region of cultivated coffee fields and the quantity of coffee produced by PNG have remained lower than those of the other top five coffee-producing countries studied in this report. The PPAP, which is being implemented by the government with the support of the World Bank, has the ability to increase PNG's coffee production and make the country more competitive in the coffee industry. However, the PPAP benefits only certain coffee farmers, making it impossible to achieve the desired rise in coffee demand. More robust and reliable monitoring and evaluation processes are needed for the PPAP to contribute more meaningfully to the coffee market. The project should place a greater emphasis on coffee tree replanting and plantation regeneration. To increase overall coffee production in PNG, all coffee growers should have access to the PPAP (for example, through an all inclusion program).

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