Another difficult year for coffee

Economic experts warn that Vietnam’s coffee industry will face another difficult year in 2010.

The coffee output in 2006-2010 (thousand tonnes)

In 2009, Vietnam exported 1.163 million tons of coffee to 97 countries, earning 1.705 billion in turnover. The figures represent an increase of 2.6 percent in quantity, but a decrease of 21.3 percent in value compared with 2008. The 10 biggest export markets, except Belgium and the Netherlands, saw sharp export turnover drops of 5-45 percent.

Obstacles ahead

Under the Ministry of Agriculture and Rural Development’s plan (MARD), in 2010, Vietnam would have 530,000 hectares of coffee-growing land, an increase of 0.6 percent compared to 2009. The ministry hoped that the average yield would be 2100 kilograms per hectare, equaling 1.082 million tons of coffee, an increase of 6.1 percent over 2009.

Agromonitor, the information service centre, argues that MARD’s plan is not likely to be implemented. Prolonged drought is spoiling hundreds of thousands hectares of coffee plants. It is estimated that 300 hectares in Dak Nong province lack water, while 1200 hectares of Dak Lak coffee plants will die without rain.

Input material prices also keep rising even though coffee prices remain low. Because of this, farmers will reduce amounts of fertilizer and watering, and they will not grow new plants to replace old plants. As such, both the quality and output will not be satisfactory.

In 2009 and the first quarter of 2010, robusta coffee prices in the world market have been decreasing, making coffee farmers suffer.

Robusta prices decreased sharply in the first quarter of 2010 because it was the high point of harvest season. The overly high supply prompted speculators to force prices down.

Economists say that robusta prices will increase again, especially when the world’s economy revives from the crisis and demand revives. ICO forecast that the world’s total demand would be 134 bags in 2010, up by 1.5 percent over 2009. The World Bank predicts that robusta coffee prices would stay at $1470 per ton.

Arabica coffee prices may move in the opposite direction. After increasing sharply in the first quarter of 2010, the price is expected to drop as Brazil and Colombia, the two main producers, harvest the main crop in April. According to the World Bank, the 2010 price will drop to $2240 per ton from $2670 in 2009.

Combined with the crisis in some European countries, and the sharp increase of the dollar against the euro, many believe that coffee prices will not rise.

Boosting exports – a difficult task

The domestic coffee price depends on the export price. Therefore, domestic price in the remaining months this year will not increase to 2008 levels. Prices will not plummet too sharply, because the Government’s plan to collect coffee for export keeps the floor price for robusta coffe at 23,000 dong per kilo.

The Ministry of Industry and Trade plans to export 1.1 million tons of coffee in 2010, a decrease of 5.8 percent from 2009. The export price is expected to be $1550 per ton, which would bring a total turnover of $1.71 billion.

According to Thoi bao Kinh te Saigon, the unsatisfactory export turnover in the first four months of 2010 makes the $1.71 billion plan unfeasible.

According to the General Department of Customs, in the first four months of 2010, Vietnam exported only 345,000 tons, with export revenue of $483 million, which is down by 27.8 percent compared to the same period of 2009.

If the same export price is maintained for the whole year 2010, Vietnam would be able to reap only one billion dollars in the whole of 2010.

Thoi bao Kinh te Saigon

Tags: Vietnam agriculture, Vietnam Coffee