Smallholder Coffee Producers in the Papua New Guinea Highlands

Trapped: Smallholder Coffee Producers in the Papua New Guinea Highlands Scott MacWilliam Discussion Paper 2020/1 Introduction independence in 1975, entrapment has intensified for a substantial proportion of the country’s people. About Soon after becoming Papua New Guinea’s latest Prime 400,000 smallholder households, or about 80 per cent, Minister, James Marape fittingly drew particular of Highlands’ households produce about 85 per cent of attention to the condition of the majority of the the national output and depend upon coffee for all or country’s population who live in rural areas. He said: part of their cash income (CIC 2017; Curry, Koczberski Eighty per cent of this country [is] still locked in and Inu 2019). These smallholders probably constitute the enclaves of rural entrapment. Those of us in around one-quarter of the country’s total population cities are enjoying and yet they are stuck up there. of over eight million.3 (‘Probably’ is employed, as PNG They deserve to be lifted. (Whiting and Graue population figures are not always reliable.) 30/5/2019) With little, if any, real increase in prices for a crop His depiction of life for the smaller proportion of that forms the most important component of household the country’s population that lives in urban areas as incomes — and with only minimal provision of state being ‘enjoyable’ ignores the impoverished conditions efforts to raise productivity and quality — households faced by many city and town residents. Further, the continue to be told that they are primarily responsible reference to ‘lifted’ suggests a recognition of the need for securing any improvements in conditions. As arabica to raise living standards as an objective of government producers in PNG become more dependent on their action but without any suggestion on how this might export crop, major changes in international production occur when previous governments have had other and consumption are against them. priorities. Nor was there an explanation for the ‘rural The crop, which had been encouraged by the late entrapment’ or a statement of how any state policy colonial administration as a means of securing village that pushed substantial numbers into towns and cities life, prior to the ascendancy of a process which was to remove the ‘rural’ component might lead to urban anticipated to produce urbanisation, industrialisation impoverishment instead.1 and landless proletarianisation (MacWilliam 2013, This Discussion Paper cannot examine how most 2018, 2019), has become instead the most important of the rural population of PNG has become locked instrument of entrapment. The promise of ‘the money in impoverished conditions, even as the United that grows on trees’ (Brookfield 1968) led to the Nations Development Programme’s (UNDP) Human continuity of relatively undifferentiated family labour Development Index rates the country as one of processes, with little division of labour and thus only low human development, 155th out of 176 (UNDP minor productivity increases, producing a crop subject 2018:310). Nor can it consider in detail differences to the vagaries of international markets. in degrees of poverty across rural areas (Allen 2009). Papua New Guinea producers as ‘price-takers’ Instead, this paper uses a particular region of the country, the central Highlands,2 and coffee-growing As very little coffee produced in PNG is consumed households in that region, to illustrate how since in the country, it is international conditions that are dpa.bellschool.anu.edu.au Scott MacWilliam an important determinant of livelihoods for coffee- shade management, application and non-application producing households in the country. Despite a of chemical fertilisers, quantity and timing of rainfall consistent drive to increase output in PNG, this as well as strength of winds, and sunshine: each and has occurred at a slower rate than has occurred all affect the health of trees and thus yields, with internationally. At independence in 1975, PNG climate change recognised as a major determinant. produced about 650,000 (60 kg) bags, or under The global production of coffee is also subject to local one per cent of global output of 80 million bags. political upheavals, including civil wars. As a result, Subsequently, world coffee production for 2018–19 output can vary considerably in the short to medium was estimated to be about 175 million (60 kg) bags, term. However, for the condition of smallholders in with PNG’s maximum reaching just over one million PNG and elsewhere, it is the long-term trends that bags in the late 1990s and again on several occasions are most important and will be emphasised here. The in the next decades (CIC 22/3/2017). That is, world persistence of surplus production over consumption, production has more than doubled, while PNG’s output the importance of the rise of new sources, especially has increased by approximately one and a half times Vietnam and Indonesia, and the increased output of (Sengere 2016:92; USDA 2019; OECD 2007).4 lower quality and priced coffee, particularly robusta, are Even as PNG’s output has increased since the most important of these trends (see below). independence, almost all of the country’s exports are The importance of coffee exports for national still in the form of green bean: only small amounts are revenues and company profits has resulted in either sold overseas or consumed domestically as roast a continuous threat of production exceeding and ground coffee. The effect is that prices received consumption on world markets (Economist Intelligence by smallholders, with relatively slight variations due Unit 1987). Further: to the abilities of trading companies and processors to Since 1964, world coffee production has grown grasp shares of these prices, are largely determined by at a rate of 1.4% per year, increasing from 3.1 to international trends for particular varieties of this form 6.3 million tonnes. With a lower growth rate than of coffee. (There are continuing disputes, not examined Robusta (0.9% as compared to 2.7%), Arabica’s here, about the extent to which traders and processors share has fallen from 4/5 to 2/3 of total coffee ‘distort’ these trends and undercut the prices paid to production over the last 40 years … Arabica is growers. See Batt and Murray-Prior 2007). far more sensitive to climatic conditions and In terms of coffee exports, PNG continues to be therefore subject to greater fluctuations in its what is termed a ‘price-taker’. Further, most of PNG’s production from year to year. (OECD 2007) coffee goes to those sections of the market where downward pressure on prices has been most substantial By 2019, while the year-on-year variability in over the last 40 years, as explained below. With only production continued, in part due to the biennial occasional peaks, international prices for PNG’s main bearing pattern prevalent for arabica trees, robusta’s coffee exports have remained stagnant in nominal ascendancy became even more apparent (USDA terms since independence (Sengere 2016:92, Figure 2019). Occasionally, major weather shocks and civil 4.3). Regardless of this price trend, as the smallholding wars have broken the long-term trend of production proportion of total output has increased, from around exceeding consumption. These exceptional events, as 70 per cent at independence to about 85 per cent well as climate change, have often led to new plantings currently, there has been a continuous call to increase and subsequent production increases, with supply production and improve quality (see below). once again exceeding demand as governments urge continuous increases in production. Because green Part 1: Global coffee: Persistent surpluses, bean can under optimal conditions be stored for changing sources and the rise of robusta periods without losing quality, the relationship between Surpluses production and consumption has also been affected by the capacity of various state agencies to withhold The production and marketing of coffee is affected stocks. In periods of low prices, warehouses are filled by important local, national and international until coffee is subsequently released on to markets determinations. Soil fertility, attention to pruning, at propitious times when prices rise: the annual 2SSGM Discussion Paper 2012/1 http://ips.cap.anu.edu.au/ssgm Department of Pacific Affairs DPA Discussion Paper 2020/1 relationship between total production and consumption oriented market economy, the program sought to deal is continuously mediated by the level of global stocks with the disorder created by prolonged warfare through (USDA 2019). expanding domestic agricultural and manufacturing Total global production has also been affected by production. Rice and coffee became two of the most the emergence of major new producing countries, important export crops. Some of the expansion of where robusta is the principal form of coffee grown. coffee-growing involved moving populations into Robusta production has become more important in highland areas, suitable for growing arabica, but a more countries, including Brazil, where arabica’s previous substantial increase occurred by stimulating the output predominance is now under challenge (see USDA of robusta in lower altitude regions. As the World Bank 2019, and below). Over the last 30 years, Vietnam and (2004) noted of Vietnam: Indonesia have risen into second and fourth places For decades the state has been an integral part of in total output (Zhang 2016; Indonesia Investments the coffee sector’s development … Government 2019). Both countries have become more important and parastatal organizations increasingly embrace for robusta production and play an important part in free market structures but still have a presence in that crop moving toward parity with arabica output the sector. Government is the primary and most (OECD 2007). Since 1988, with funding and other influential institution and has created nearly the assistance from the UNDP and the World Bank, China entire sector’s other institutions.

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