EXPLORING THE DRIVERS OF COFFEE PRODUCTION IN MALAYSIA: A SHORT- AND LONG-TERM ANALYSIS

Abstract

Coffee demand in Malaysia has shown an increasing trend; however, domestic production remains relatively low and unstable. This study examines the short-term and long-term effects of selected macroeconomic variables on coffee production in Malaysia using secondary data from 1982 to 2023 and the Autoregressive Distributed Lag (ARDL) approach. The results indicate that, in the long run, climate conditions (proxied by rainfall) and population growth are the main positive drivers of coffee production, reflecting the importance of favourable weather and growing domestic demand. In contrast, cultivated land area and cocoa prices are negatively associated with coffee production, suggesting land-use constraints and crop substitution effects. In the short run, government expenditure and rainfall exert positive influences on output, highlighting the role of policy support and climatic conditions during early adjustment periods. Lagged effects of past production, land use, cocoa prices, and government expenditure also contribute positively, indicating that historical decisions and investments continue to shape current production outcomes. However, adverse weather conditions in previous periods negatively affect yields, underscoring the vulnerability of coffee production to climatic extremes. Overall, the findings suggest that while targeted policy support can facilitate short-term production responses, the long-term sustainability and growth of Malaysia’s coffee sector depend primarily on climate resilience, efficient land use, and demand-driven factors. Strengthening adaptive capacity, improving productivity, and enhancing value-chain efficiency are therefore essential to improve competitiveness and support sustainable development of the coffee industry.