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Southeast Asia

Vietnam to grab coffee market by the beans
By Tran Dinh Thanh Lam

HO CHI MINH CITY - Reeling under the triple whammy of continued low coffee prices, drought-related crop destruction and allegations that its coffee has unbalanced the world market, Vietnam is hastily reorienting its once-highly lucrative coffee industry.

An early incentive has been an encouraging increase in price, which is now up to VND12 million (about US$775) per tonne, though still a far cry from the days when it was $2,000 a tonne.

"The worst may be over for embattled coffee growers like us," said Nguyen Vang, the owner of a 36-hectare coffee plantation in the Central Highlands province of Dak Lak. "For the first time in many years we may be able to pay off our debts."

The new mantra is quality instead of quantity, premium arabica bean instead of run-of-the-mill robusta.

It is just the recipe to support the plans of the International Coffee Organization, outlined at a specially convened meeting last month. The ICO blamed overproduction and an increase in poor-quality coffee for driving coffee prices down to their lowest level in 30 years. The solution? To remove "between five and eight percent of the lowest-quality coffee from the export market".

Emphasizing that Vietnam "will learn from Brazil and other countries that have experienced the same problems in limiting the volume of low-grade coffee exports and balancing the plantation of robusta and arabica", the chairman of the Vietnam Coffee and Cacao Association (VICOFA), Doan Thien Dao, said the country "will not export low-grade coffee anymore".

The "quality" coffee exports that Vietnam is now seeking to make available do not focus only on the balance between the harsh-flavored, cheaper robusta and the mellow, expensive arabica varieties, but also on the production processes.

Dao said Vietnamese coffee traders will try to reach the minimum ICO standards for coffee exports - low moisture content of less than 12.5 percent and fewer bad beans per sack.

But the new focus on quality is easier said than done. Drought has destroyed part of Vietnam's coffee crop and the country is expected to export less than 500,000 tonnes of coffee beans at the end of this year's harvest in September, compared with 761,000 tonnes the previous harvest, according to VICOFA.

Despite falling prices, the call from coffee experts in Vietnam to reduce the cultivation of robusta in Vietnam may run into practical difficulties. Agronomists and officials are advocating a shift, on about 120,000 hectares of low-productivity land, from robusta to cash crops such as pepper and cashew.

The reality, however, is that this reversal is being sought against a background where, since 1980, the amount of land given over to robusta cultivation has increased an enormous 80 times.

For the farmers, there is more to worry about than low coffee prices and low quality standards. "Planting new crops is too adventurous," said Nguyen Trong, owner of a 20-hectare robusta plantation in Dak Lak. "We do not even know where to sell them and at what prices."

That is a problem that has bedeviled coffee too. Dinh Xuan Quang, former World Bank official and now advisor to the United States Agency for International Development (USAID) in Jakarta, said that in Vietnam, coffee growers only know market prices indirectly, mainly through their customers.

"That is why when prices go down, they sell at a loss, and when prices go up, they make little profit. In the past, growers got 45 percent while processors and traders collected 55 percent. Now the rates are 10 and 80 percent, respectively."

The reluctance to switch crops and lack of adequate information explains why only 10,000 hectares of what were formerly robusta plantations have, countrywide, been replanted with new crops.

Nguyen Van Lang, chairman of the Dak Lak People's Committee, remains confident that "we will plant coffee only on 15 percent of our land". For a province that had 7,000 hectares of coffee in 1975 and now has more than 260,000 hectares, that is an ambitious target.

Vietnam's coffee industry is often used as a scapegoat for which to blame the steady decline of coffee prices worldwide: too much low-quality bean made available at a time when the big four coffee purchasing conglomerates - Nestle, Kraft, Procter & Gamble, and Sara Lee, who together buy nearly half the world's coffee - have bought robusta to cut their costs and used new roasting technology more skillfully to create blends.

But industry experts also consider a lack of information to be partly responsible for Vietnamese coffee's low price. "How can a Vietnamese coffee grower in the highlands know what the price of coffee may be in three or five years so as to make the right investment?" asked Quang.

Quang would like Vietnam's coffee growers to learn from coffee-producing countries in Africa and South America, where "growers are linked by satellite to London and know the ups and downs of international market prices, and thus decide to sell out or stock their goods".

Agronomist Vo Tong Xuan, a teacher at the An Giang University, added that Vietnamese growers could get their market and commodities information via radio and television. Radio, an effective solution in provinces such as Dak Lak, is indeed used - the Voice of Vietnam broadcasts a daily bulletin of world markets including export coffee prices.

To pick the coffee industry up by its bootstraps, Vietnamese growers also argue that they should follow Brazil, Malaysia and Peru in developing a strong domestic market to consume the extra volume. "The domestic market is one of our major targets," said VICOFA secretary general Dao Thi Mui. "We will develop domestic demand so as to reduce oversupply.

"At present, Vietnam consumes around 70,000 tonnes of coffee, which is not much for a country of 80 million people," added Mui. "We usually drink more tea than coffee. Things are changing in the big cities, and this gives hope to coffee manufacturers."

(Inter Press Service)
 
Jun 18, 2003



 

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