Climate change and the global coffee industry: Factors that promote development in coffee production

By Tran Anh Vu (VNP 25)

Supervisor: Dr. Ho Quoc Thong

Abstract:

Agriculture is one of the industries that depend heavily on the climate. Due to various reasons, climate changes lead to harmful phenomena, such as pests, drought, floods, affecting the agriculture sector. These phenomena not only cause destructiveimpactson agriculture in general,but also it has some environmentally sensitive influences on particular crops. Coffee is one of the significant contributors to many developing countries' GDP, such as Brazil, Colombia, Mexico, Vietnam, and Indonesia.
Previously, existing studies focused on the impact of climatic factors –i.e., rainfall and temperature on coffee yield. Some examined both environmental factors and socio-economic factors affecting coffee production. These studies focus on the scope of research incertain areas, whereas climate change happens across the globe.
Firstly, this study focuses on the interaction between coffee production, climatic, economic, environmental,and geographicvariables in the world's six largest coffee producing and exporting countries.Multiple variables regression model is applied for evaluating the effects of these factors on coffee production in this case.. Data in the model isillustratedin panel data, including climatic data (temperature, precipitation), socio-economic variables, environmental and geographic variablesof six countries from 1991 to 2016, which were collected from various secondary data sources.
The results achieved in this study are summarized as follows. The model shows that climatic variables such as temperature and precipitation are the essential climatic factors for coffee production as the results of previous studies indicate coffee's sensitivity to seasonal temperature changes. The results showa significant effect of summer, autumn, winter temperatures on coffee production. In particular, the impact of average temperature in summer/autumn on coffee production is a negative effect, whereas the average temperature in winter has a positive relationship with coffee production. In terms of average rainfall, the results show that the rainfall does not seem to affect significantly coffee productionexcept for winter precipitation. Although, in practice, rainfall is extremely important for the growth ofcoffee trees.In addition, some variables belonging to other groups of factors are also significant for coffee output. Specific results will be presented below.
Secondly, the research identifies the relationship of factors affecting the number of projectsinvested fordevelopment related to the coffee industry. Results from the Poisson model and Negative binominal model show that the factors: coffee harvested area, coffee inventory, CO2emission, GDP, fertilizer price, rural populationare the factors thathave significant impacts on the model. At the same time, these factors positively impact the number of projects related to coffee.
Finally, many solutions have been proposed to improve the coffee industry in the case of environmental climate changes, fluctuation of socio-economic factors,environmental and geographic elements. For example, managingstrictly useofthe input materials, balance production reasonably. Other methods are proposed, such asapplyingtechnology, production model, improved plant varieties to adapt and minimize the effects of climate change. Next, the producing and exporting countries need to have reasonableland-usedevelopment strategies and policies to stabilize the marketsto maintain a balance between supplyand demand by coffee-producing countries. Alternatively, they can invest in strengtheningmarket information system to determine production costs and income benchmarks for farmers. Besides that,cooperation for supply chains that are promoted to establish the right trading conditions and prices to keep the market stable, support farmers, and ensure sustainable development of the coffee industry.

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