Prices escalating, but people run out of coffee

The coffee price has climbed up to 29,000 dong per kilo, but farmers are not happy, because they have nothing to sell right now.

Coffee price rising fast

On June 29, 2010, the coffee price in the London market surged to an 18 month-high at $1710 per ton. At that time, the coffee export price in HCM City was $1610 per ton, while the coffee price in Dak Lak, at which companies collect coffee from farmers, was 28,600 dong per kilo, or $1505 per ton.

Market analysts have pointed out that, while the world’s prices have been increasing rapidly, the domestic price has risen more slowly. In late February, for example, when the coffee price dropped to its lowest point, the price in London was $1216 per ton, the export price in HCM City was $1146 per ton and companies collected coffee from farmers at 22,500 dong per kilo.

Four months later, the price in London increased by $494 per ton, and the export price in HCM City increased by $464, and domestic coffee increased by $321.

“This means that the price at which farmers sell coffee to companies has been increasing more slowly than export prices. It is export companies that enjoy a fat profit from the gap between the domestic and export price,” explained Nguyen Thinh, a coffee market researcher and founder of giacaphe.com website.

The price levels were figures provided by export companies. In fact, farmers cannot sell coffee directly to companies and must sell products to intermediary merchants at prices that are much lower.

Farmers feel sad

According to Vietnam Coffee and Cocoa Association (Vicofa), the export price has increased significantly because of the Government’s program on storing 200,000 tons of coffee. Vicofa did not release figures on how much coffee has been collected, but, according to Luong Van Tu, Vicofa’s Chair, the impact of the program is not only measured by the volume, but also by its impact on the world’s supply.

Farmers who produce coffee do not feel happy. They have no coffee to sell at this moment and only a few farmers, who have big coffee-growing areas, had enough capital to store coffee.

Vo Van Hung, a coffee grower in Dak Lak province, has been growing coffee for the last ten years, but he can never decide when to sell. In most cases, Hung must sell coffee right after the harvest, when the price is low.

Hung related that several years ago, with five sao (one sao is equal to 360 square metre) of coffee plants, his three member family could live well. Nowadays, as coffee prices fluctuate and the prices of other goods increase, Hung must work for other people to earn extra money.

Export companies in Dak Lak admitted that, while the coffee price has been increasing, this does not benefit farmers, because they have sold all their coffee.

Analysts estimate that, if selling coffee now instead of two months ago, farmers would have 7-8 million dong per ton more.

Tags: Vietnam Coffee, Vietnam coffee prices