Good Price Doesn’t Mean Happiness

 

Vietnam is the second largest coffee exporter in the world after only Brazil but its coffee industry is assessed mismatched development potentials. According to the Vietnam Coffee and Cocoa Association (Vicofa), the country exported 1.1 million tonnes of coffee worth nearly US$1.7 billion. Its coffee growing acreage in 2010 was 548,200 ha and 146 coffee exporters were licensed.

 

Last year, when the coffee price dropped to only VND24,000 per kilo, growers suffered heavy losses and many abandoned their farms (due to lack of capital). After the Lunar New Year, or Tet, prices rose sharply to VND46,000 per kilo. Thus, although the output is forecast to slump 15 percent, soaring prices will hike the export value to US$2 billion this year.

 

Higher price is good news for any sellers but coffee growers have to sell their products immediate after harvesting to have capital for the next crop. Some even sold before Tet when price was less than the current half. In Dak Lak, the capital of Vietnamese coffee industry, more than 80 percent of coffee area is managed by smallholders who cannot keep their products to wait for foreseeable higher prices because they need money to start another crop.

 

Vietnam opened the coffee market to foreign companies from 2011 as it committed with the WTO. Foreign companies have the right to export coffee but they do not have the right to organise a purchasing network in Vietnam, according to the Circular No. 9 dated July 17, 2007 of the Ministry of Industry and Trade.

 

However, domestic companies accused foreign enterprises of having established coffee purchasing networks in Vietnam. As there are so many collectors but there are a few importers; thus, when importers set up purchasing networks, domestic companies will not be able to compete given limited capacities. Though there is no official statistics, some sources said about 10 large foreign companies are setting up direct purchasing agents in Dak Lak, Dak Nong, Lam Dong and Gia Lai provinces. After collecting coffee, they will process, examine and export.

 

Farmers should not be blamed because they will sell to who pay higher and care them more. For years, domestic companies were repeatedly advised to join hands together to invest in material areas and support farmers after harvest but they could not do it.

 

If they followed recommendations, foreigners would not easily penetrate our market. After years being badly treated by domestic companies, they now prefer which pay them higher and treat them better. If domestic companies lack long-term competition strategies, they will yield to foreign enterprises.

 

Vicofa has proposed in writing authorities to impose penalties on foreign violating coffee purchasing regulations. However, authorities have taken any action.

Characteristically, there is only one coffee harvest in a year. Farmers and enterprises need capital to keep the grain to wait for higher value instead of selling at low prices. This year, the Prime Minister decided to support farmers and companies to store 300,000 tonnes of coffee.

 

In addition, the Ministry of Agriculture and Rural Development proposed several other measures to support coffee growers such as: using contracts between farmers and enterprises to borrow or borrow on security. Of course, beneficiaries are selective.

 

The ministry also proposed measures to directly support coffee growers when they face market and price risks. In case selling prices are below cost prices, the State will help farmers to pay interests of loans used to purchase materials, tools, etc.