Coffee prices record new heights after soaring 34 percent so far this year, after adding 56 percent in 2010. Particularly, prices climbed an additional 5 percent in the first few days of May to VND50.1 million per tonne. However, higher prices do not generate better earnings for Vietnamese farmers and traders, but for foreign companies. Mr Luong Van Tu, Chairman of Vietnam Coffee and Cocoa Association (Vicofa) shared his viewpoints on this matter.
Why have coffee prices risen very sharply in the past time?
Unfavourable weather is dwindling output in some countries. For instance, Indonesia's robusta coffee output sinks 30 percent. Some other countries like Columbia and Brazil are replacing aging coffee trees with new ones. As a result, coffee prices leap. The harvest of 20 percent of Brazil’s robusta coffee output was delayed by long rains, while production in Columbia declined by a third. In Vietnam, inventories transferred from previous years are declining. This year, coffee trees are being attacked by insects and erratic weather, leading to a drop in productivity.
Secondly, the world’s coffee demand rises 2 - 2.5 percent this year because the economy starts to recover. Thirdly, coffee prices are also affected by dollar value.
Do Vietnamese businesses make a profit from high coffee prices?
Vietnam is at a loss only for its robusta coffee cultivation. Robusta coffee prices have surged to the highest level in 15 years to nearly US$2,600 per tonne, while arabica coffee prices climbed to the high of 30 years to more than US$6,000 per tonne.
At the beginning of this year, the association proposed purchasing coffee but it was turned down by authorities, given already high prices. If we had accumulated from the start of this year, we would make great success. Moreover, foreign firms set up their own purchasing networks to collect coffee directly from farmers in the Central Highlands provinces. With strong financial capacity to pick up coffee, they are now enjoying fat profits.
Foreign companies are intervening deeper into the Vietnamese coffee market. Could you introduce some solutions to this situation?
Vicofa has proposed related ministries and other relevant agencies to deal with violations in coffee purchase.
The deeper and illegal intervention of foreign companies in the coffee market is partly because domestic companies lack coordination in buying coffee from farmers. Farmers only sell to companies with higher prices and treatments; thus, they naturally choose foreigners. Especially when prices of inputs like wages, pesticides, fertilisers and transportation costs are on the rise, they must quickly sell to get money to boost production and cover debts.
How will the coffee market develop from now toward the end of this year?
According to popular forecasts, the coffee market will be in good condition from now to the end of this year, because coffee prices are not as volatile as rice prices. Hence, companies can feel assured with their production and purchasing plans. However, it is noted that arabica coffee prices will be strongly affected when Brazil is planning to sell its coffee stockpiled since 2009, which is estimated at 1.5 million bags.
This year, the country is expected to earn US$2 billion from coffee export this year.
Huong Ly
Vietnamese
