Coffee is one of the most important cash crops in Papua New Guinea (PNG), with export revenues consistently topping US$100 million per annum. Total production for 2016 was nearly 1.2 million 60-kg bags (70,260 tonnes). Globally, PNG ranked 18th in the world for coffee production for 2016/2017 (USDA and FAS 2017). Most of the coffee produced in PNG is the Arabica species, the main Arabica coffee – growing provinces being, in descending order of importance, Eastern Highlands, Jiwaka, Western Highlands, Morobe, Simbu, East Sepik, Southern Highlands, Enga, Madang, Oro, Sandaun (formerly West Sepik), Milne Bay, Central and Gulf (CIC 2016:3). Importantly, coffee is the mainstay of the local economy, especially in the main Arabica-growing provinces of the highlands. In the period 1990–1995 Arabica provided 33 per cent of all income from agricultural activities — more cash income to rural villagers than any other commodity. This situation is likely to hold true today, although fresh food production has increased greatly since that data were recorded. The coffee sector in PNG mainly comprises smallholders (approximately 400,000) and it is estimated that 3 million people in the country are dependent on coffee income.
Two types of coffee are cultivated in PNG. Arabica coffee, the most important, is usually grown between 700 m and 2050 m altitude, but occasionally as low as 100 m and as high as 2400 m. Robusta coffee, considerably less important, is usually grown between sea level and 550 m. Both types of coffee are grown in environments where average rainfall is 1700–5000 mm per year.
The production of Arabica coffee is highly seasonal. The main season varies a little between years and between locations, but is generally in the period May to September and particularly in June, July and August. A study of Robusta coffee found no definite harvesting season in the Gazelle Peninsula area, East New Britain Province. However, in the Milne Bay area further from the equator, the main harvest occurs between May and August with the peak in June–July.
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Adoption and history
Coffee was first introduced to PNG in 1873 and was growing in the Rabaul Botanical Garden by 1890. Between about 1900 and 1940, several plantations were established in Central Province and around Wau in Morobe Province and by villagers in the Sangara area of Oro Province. However, coffee remained an insignificant cash crop until the early 1950s, when commercial production of Arabica coffee commenced on small expatriate-owned plantations and in villages in the central highlands. Before 1960, most of the Arabica coffee exported from PNG was grown in highland regions of Morobe Province, particularly in the Wau, Finschhafen, Kaiapit and Wasu areas, but during the early 1960s a rapid expansion of smallholder coffee production occurred in Western Highlands, Simbu and Eastern Highlands provinces. This expansion occurred as a result of extension activities, the absence of alternative cash-earning opportunities, high export prices for coffee, the construction of the Highlands Highway in the mid 1960s, and the example provided by the plantation developments.
Robusta coffee had been grown successfully in Oro and Milne Bay provinces, and in parts of Central, East New Britain, Madang and East Sepik provinces. However, production grew slowly in comparison to the rapid expansion that occurred in the highlands. Robusta coffee has always attracted significantly lower prices than Arabica.
The Australian Administration was forced to slow the rate of growth of coffee production in PNG to meet quotas imposed by the 1962 International Coffee Agreement. Measures taken included the prohibition
of further estate development; a ban on planting coffee on new agricultural leases, including settlement schemes; and reduction of extension and promotional activities in the smallholder sector. Despite these measures, smallholder production continued to increase at an average rate of 28% per year between 1961 and 1968. Most of this expansion occurred in Eastern Highlands, Western Highlands and Simbu provinces, where it is known that many Australian agricultural extension officers chose to quietly ignore the bans on assisting villagers to plant coffee.
Following the abandonment of the quota requirements of the International Coffee Agreement in December 1972, the PNG Government attempted to reinvigorate coffee extension and promotion activities, particularly in the less developed areas of the country, such as Southern Highlands Province. It is possible that the renewed extension and promotion efforts resulted in the significant increase in smallholder production that occurred in the 1970s, although other factors, such as high export prices, were more important.
In the early 1980s the government sponsored the development of smallholder coffee blocks. These were parcels of land removed from customary tenure and owned and operated by families or groups of families, separate from village plantings. The blocks had from 5 ha to 29 ha under coffee and were often managed by a professional organisation. The Coffee Industry Corporation (CIC) estimated that there were 636 coffee blocks in 2007. The current standard of management is highly variable, with many blocks producing poorly.
Distribution of production and planting
Western Highlands and Eastern Highlands provinces continue to dominate coffee production in PNG, contributing about 82% of the total quantity of coffee produced in 2006. Other provinces that contributed to coffee production in 2006 were Morobe, Simbu, Enga and Southern Highlands. Robusta production has traditionally been dominated by East Sepik Province, which increased its output steadily during the 1990s, mainly as a result of new plantings in the Wosera and Maprik areas. However, production in East Sepik Province has fallen significantly since 2002 as a result of increased cocoa and vanilla plantings. Historically, Arabica coffee has accounted for about 95% of production, with Robusta the remaining 5%, but Robusta production has declined in recent years to less than 1% of total production.
There is little current information concerning the area of land planted to coffee in PNG. According to a 1999 estimate, approximately 70 000 ha were planted to coffee, of which 57 000 ha were smallholder plantings, with the remainder in the plantation and block sectors. In 2007, according to CIC figures, plantations had 4400 ha under coffee and the blocks an estimated 12 000 ha. Based on production from 2004 to 2006 and average yields, it is estimated there is 70 000–85 000 ha of smallholder coffee and 12 000–15 000 ha of plantation and block coffee.
Levels of production
Coffee production, measured by the quantity exported, increased rapidly between 1960 and 1980, but the rate of increase has slowed since 1980. There has been virtually no new coffee plantation development since 1961 and the plantation sector has declined since the mid 1980s. There were 107 coffee plantations operating in 1977, but only 33 in 2007. Hence the significant increase in production over the past 40 years has come entirely from the smallholder sector. Between 1985 and 2005 smallholder production doubled and its contribution to overall production increased from 65% to 85%. Conversely, production from plantations and blocks halved over this period and their combined contribution decreased from 35% to 15%.
Since 1978 the total annual production of coffee has exceeded 40 000 tonnes. Production peaked at 84 000 tonnes in 1989 and again in 1998. The variation in annual production that has occurred since 1980 is mostly explained by fluctuations in the export price and annual rainfall. Smallholder producers are very sensitive to returns on their labour and so are highly responsive to changes in price. Growth in production has been limited since 2000 by low prices (until 2004), high rainfall (in 2005 which resulted in a poor harvest in 2006) and deteriorating road access to many producing areas.
Survey data from village smallholders and plantations allows yields per hectare to be estimated. For the period 1960 to 1995, the average yield of smallholder Arabica coffee was about 950 kg/ha of green bean, while average plantation yields were almost twice this at 1650 kg/ha. There are significant differences between the highest and lowest reported yields, and where the same producers have been surveyed over a number of years, yields may vary considerably between years. On plantations, most of the variation can be attributed to differences in weather conditions between years, rather than greater or lesser attention to harvesting, as is probably the case with smallholders. However, yields on plantations appear to have decreased significantly in recent years; over the period 2000 to 2006, the average yield for plantations and blocks was 600 kg/ha green bean. This is probably more the result of changes in management than of climate.
There is an often-stated belief that coffee has a biennial bearing pattern in PNG (that is, if yields are high in one year, they are lower the following year). However, surveys by the Queensland Department of Primary Industries and by CIC over a number of years do not support this theory. Much published and unpublished data exist on coffee yields under experimental conditions, mostly from Aiyura in Eastern Highlands Province, but these are not reviewed here. Experimental yields range from less than 1 t/ha to more than 4 t/ha of green bean, with means in the range 1.5–2.5 t/ha.
Processing, exporters and markets
The Coffee Industry Corporation registered 17 exporters, 103 processors (58 ‘dry’ factories and 45 ‘wet’ factories) and 5 manufacturers, and estimated there were 5000 itinerant buyers, in PNG in 2007.
The majority of exporters and factories are located in Western Highlands and Eastern Highlands provinces. Most smallholder coffee growers process their raw coffee fruit (‘cherry’) to parchment stage before selling it either directly to factories or, more commonly, to itinerant buyers. A limited amount of coffee is sold to buyers or factories in cherry form. From time to time, attempts are made to ban cherry purchases to prevent theft of cherry from trees.
In 2006/07, six exporters accounted for 85% of the coffee exported from PNG: PNG Coffee Exports (21% of the market), New Guinea Highlands Coffee Exports (19%), Niugini Coffee, Tea and Spice (17%), Monpi Coffee (13%), Kongo (8%) and Pacific Trading (7%). In 2006, PNG exported coffee to 29 countries, with 89% of the exports going to just four: Germany (40%), Australia (20%), the United States (20%) and Japan (9%). Minor destinations included Malaysia, New Zealand, South Korea and South Africa.
The PNG coffee industry, despite its problems, has maintained a reasonable degree of international competitiveness. During the early 2000s world coffee prices were at historical lows, but the devaluation of the kina helped maintain kina returns to PNG growers. In 2005, in association with adverse weather conditions in Brazil and an upturn in the normal coffee price cycle, Arabica prices reached their highest level since 1998. Prices have remained firm since. The average export price for PNG coffee in 2006 was 40% higher than in 2004. The World Bank predicts that coffee prices will remain relatively stable until 2010 and will then decline until 2015.
Fundamental changes in the world coffee market will have major implications for the future of the PNG industry. Over the last decade or so the world coffee industry has boomed at the retail level but remained stagnant at the producer level. In the early 1990s the retail value of the world coffee industry was about US$30 billion; it now exceeds US$70 billion, but the growers’ share of profits has fallen from 40% to 10%. The future success of exporting countries, such as PNG, depends on being able to adjust to this new reality.
In addition, there has been a huge increase in the output of low-quality Robusta coffee from Vietnam and medium-quality Arabica coffee from Brazil. The abundant availability of low-priced coffee has brought about a permanent shift in demand. If PNG’s coffee industry is to remain viable in the longer term it must produce more, better-quality coffee. This can be done through a number of mechanisms including grower groups where members are committed to producing higher grade coffee and who are rewarded with higher prices for their products.
The PNG Government has set a production target of 90 000 tonnes by 2016. Expansion to these levels is likely to be constrained by limited areas of suitable land in the highlands and ongoing pressure on land; low world prices; inadequate road access for many producers; and possibly by increasing rainfall associated with global climate change. A potentially serious insect pest, coffee berry borer, is present in Papua (Indonesian New Guinea) and only urgent quarantine action along the border will prevent it moving into PNG in future years. If this pest becomes established in the PNG highlands it is likely to have a severe effect on coffee production.
The most important issue for the PNG coffee industry is to improve the quality from existing plantings. If it can succeed in doing this, it has a bright future and coffee will continue to make a substantial contribution to highlanders’ living standards.