Vietnam Coffee are back on Track

Vietnam Coffee are back on Track

Although in 2004, the Vietnam coffee industry has shown signs of recovery after four years of recurring losses, many experts say that the industry is reducing losses as prices of Vietnam's coffee products are still low. Many foreign coffee traders say that Vietnam has yet to concentrate on the quality of their coffee. Instead, a focus has been given to increasing output. As a result, while Vietnam has the highest coffee export volume in the world, its products are bought at low prices.

Deputy Trade Minister Mai Van Dau said that a rapid increase in output and export volume when the world market had become saturated had led to a price crisis since early 2000, causing great losses for coffee farmers, producers and exporters. Therefore, it is time producers increased the quality of products to gain higher prices. In the coming time, the Ministry of Trade will cooperate with the Vietnam Coffee and Cacao Association (Vicofa) to draft a document on measures to increase the quality of coffee to submit to the Government for approval. This will help coffee producing enterprises to get rid of customs and habits which are unsuitable to coffee trading in the world market.

The customs service's statistics show that Vietnam's coffee export volume in the first five months of this year hit 460,000 tonnes, earning US$310 million, up by 53 per cent in volume and 46 per cent in value against that of the same period last year. The Ministry of Trade expects Vietnam this year to export 800,000 tonnes of coffee, earning between US$540 million and 550 million, or US$675 per tonne on average. Coffee producing enterprises say that Vietnam should keep its coffee plantations at a suitable level and maintain export volume of between 750,000 and 800,000 tonnes per year. For increasing effectiveness in the world market, enterprises should focus on their production activities with a restructuring of varieties. Greater attention should be paid to the tending of coffee trees, drying, processing and preserving the products.

The Ministry of Trade has also proposed the Ministry of Planning and Investment to provide investment for the building of three agro-produce markets within a plan to establish the Dak Lak coffee trading market to help enterprises overcome difficulties in collecting coffee materials for export.This is an important project to help stabilise the domestic coffee market. Accordingly, each market will have three areas, including an information area, bonded warehouses for coffee farmers and a trading area. The trading area will serve as place for transaction between producers and exporters and between exporters and importers, which will act as a basis for developing forward contracts for coffee products.

To overcome difficulties in material collection, Vietnam is considering the establishment of warehouses and the development of deposits for coffee farmers as a direct financial support mechanism for producers. The main goal of the programme is to provide loans for producers early on in the season, helping them ease cash-flow pressure. This will in turn constrain farmers from selling their products before they have fully matured, thus helping them avoid depreciation in prices. Soft loans are also being considered for direct support from the State for producers.

However, so far most coffee exporters have accessed market information via the network set up by foreign agencies, such as Bridge and Reuters, though the information is often confusing. Therefore, the minister of trade has recently issued Decision 0445/2004/QD-BTM on a trade information mechanism to provide monthly information on sudden developments in major import and export items, including coffee. Cooperating with business associations, enterprises will have more information for forecasting prices and choosing suitable business activities. However, to minimise losses and risks in their business activities, many enterprises have proposed the Government to provide them with support by organising training courses on trade to help them increase their skills in negotiations.

• Kim Phuong