Adding Value for Vietnam Coffee

Although Vietnam is the world’s second largest producer and exporter of coffee, the value that coffee returns to growers and exporters is not high at all. Exports are mostly robusta coffee (little processed), which is grown mainly by smallholding farmers. Quality and simple processing limit the price of Vietnamese coffee on the international market.

According to the General Statistics Office (GSO), in 2010, Vietnam exported 1.1 million tonnes of coffee worth nearly US$1.7 billion. At present, the Southeast Asian nation is the second largest coffee producer and exporter in the world after only Brazil. Although the output slumped owing to bad weather, soaring prices hiked the value. Coffee exporting price averaged at US$1,503 per tonne in 2010, compared with US$1,462 in 2009.

 

The GSO said Vietnam’s coffee growing acreage in 2010 was 548,200 ha, an increase of 9,700 hectares compared with 2009. The coffee output was estimated at 1,105,700 tonnes, up 4.6 percent. Currently, Vietnam has 146 enterprises coffee exporters and licensed 26 world-leading coffee purchasers to open offices in Vietnam. All these units are selling to eight world’s largest coffee roasters, which are now holding 80 percent of the global coffee market.

According to the International Coffee Organisation (ICO), Vietnam’s coffee output in the 2010-2011 crop year will account for 13 percent of global production.

 

In 2011, according to experts, if global coffee price stays at about US$ 2,000 per tonne, Vietnam will export more than 1.28 million tonnes of coffee worth US$2 billion in 2011.

 

However, according to experts, the result mismatched the potential. Giving reasons for this remark, Mr Luong Van Tu, President of the Vietnam Coffee and Cocoa Association (Vicofa), said: Vietnam is drafting the sustainable coffee development strategy. The Ministry of Agriculture and Rural Development is expected to submit this strategy to the Prime Minister in the middle of 2011. Vietnam also needs to replace old coffee trees, accounting for some 30 percent, in the couple of years.

Although coffee export was positive in 2010 and was estimated to be better in 2011, the Vietnamese coffee industry still faces many problems that need to be solved.

 

The most concern is the quality of coffee in Vietnam. According to Mr Doan Xuan Hoa, Deputy Director of Trade and Agroforestry, Aquaculture and Salt Industry Department under the Ministry of Agriculture and Rural Development, some small companies make light of this issue In addition, the link of farmers, processors and traders remains very weak. Coffee growers have little access to information sources and sometimes groundless rumours can affect their selling decisions, causing the market volatility. This negatively harms the sustainable development of coffee industry.

 

Besides, the production scale is too small, with more than 85 percent of coffee farms smaller than 2 ha - an unfavourable condition for applying scientific and technological application, leading to uneven quality of coffee. Processing methods are obsolete. Over 90 percent of coffee is processed by dry and half-wet methods.

 

It is very difficult for Vietnam to raise coffee price if the quality is not improved. Up to 99 percent of coffee exported is unroasted.

 

Preliminary processing is non-concentrated. Over 80 percent of coffee is processed by small households, of which 50 percent of households lack drying ground and 80 percent of households have no dryers. Thus, their processing must depend on the weather. Most dryers in use are manufactured by local companies and their technology is not high while imported dryers are unpopular because of its expensiveness. Another reason for the low value of coffee is early harvesting.

 

Besides, cornering by international companies is a reason for low price of Vietnamese coffee. On the other hand, Vietnam do not know to exploit traditional coffee markets like the EU and the US and other emerging markets such as China, India, Russia and Japan.

 

According to experts, speculators often use their financial capacity to force up or down prices. Thus, Vietnamese coffee companies must know how to deal with pressures caused by speculators. When the price declines, they should not accept futures contracts but spot deliveries. Besides, they should purchase and store coffee to ensure stable supply and prices.

 

In couple with heightening coffee quality, according to experts, to stabilise coffee prices in the long term, coffee deals must be insured and coffee stockpiling should be legislated.