Coffee prices have plunged to a three-year low. Combined with unfavourable weather and tax fraudulence, Vietnamese coffee growers, traders and exporters are facing substantial losses.
Price at record low, farmers suffer losses
The 2012 - 2013 coffee season has just ended with sadness creeping over both coffee farmers and trading companies in Vietnam. Particularly, with the current price at a three-year low, farmers are facing heavy losses.
Specifically, in November and December 2012, coffee bean price hit the year low at VND38,100 - 38,300 per kilogramme but it revived slightly in early 2013 to reach VND43,000 - 43,500 per kilogramme in March. However, the price of Robusta bean coffee kept going down from May to hit VND30,700 per kilogramme in October. On November 1, 2013, coffee prices dropped another VND600 to a multiple-year low of VND30,100 per kilogramme.
Mr Luong Van Tu, Chairman of the Vietnam Coffee and Cocoa Association (Vicofa), said, given the current expense of VND75 million for each ha and a productivity of 2.5 tonnes or less per ha, farmers will surely incur losses.
Vicofa Vice Chairman Nguyen Nam Hai said, apart from the falling price, severe drought and devastating pests together with other adversities are posing farmers to a lean year of farming. As many as 40,000 ha of coffee farms have been seriously affected and about 5,000 ha were lost because of drought and water shortage in May. In addition, aging coffee trees with lower productivity currently account for 30 percent and the acreage of old crops will continue to enlarge in the coming time.
Businesses bemoan tax pains
Like domestically traded price, coffee export price, delivered at Ho Chi Minh City ports (FOD price) also plunged to a three-year low of US$1,520 per tonne, causing many local companies to run losses.
According to statistics from Vicofa, Vietnam exported 1.03 million tonnes of coffee worth US$2.2 billion in the first nine months of 2013, down 23 percent in volume and 22.4 percent in value from a year ago. Giving explanation to the decline, Vicofa Chairman Luong Van Tu said the change in value added tax (VAT) since early June caused many companies to lose VAT refunds and encounter capital shortage for new transactions.
He added that EU importers which purchased 70 percent of Vietnamese exported coffee tended to redirect their orders to Brazil, India, Indonesia and other exporters because of tax refund troubles with Vietnam. “As 95 percent of coffee output is for export and only 5 percent is for domestic consumption. The collection of 5 percent tax at the time of purchasing and the refunding after the export is procedurally cumbersome and cost-consuming for companies. Therefore, we suggest ending all VAT on coffee from November 1, 2013,” said Mr Tu.
Vietnam is forecast to export 1.3 million tonnes worth US$3 billion this year, down 11 percent in volume and 10 percent in value year on year.
M.T
Vietnamese
