Coffee sector wakes up to value of processed, organic brands

Despite an average drop of 20 percent in coffee export prices and revenue, the prices of organic and processed coffee are still sustainable and there’s even a shortage of supplies for export. To offset the drop in green coffee export prices, Vietnam’s coffee sector is targeting development of high quality brands. Vietnam Economic News’ Phuong Lan spoke about this shift with the Chairman of the Vietnam Coffee and Cocoa Association (Vicofa) Luong Van Tu.

Vietnamese coffee prices will increase once they meet importers’ requirements for quality

Coffee exports in 2019 have met with many difficulties due to a sharp decline in prices. What are the reasons for this drop?

In fact, this year’s coffee prices are not as low as they were in previous years. The difference is that in other years, coffee prices fell for only one month, but this year’s price drop has lasted longer and affected Vietnam’s coffee sector. Current prices of Vietnam’s green coffee are lower than those of other countries and farmers have not earned a profit.

The low coffee prices are partly due to the global economic slowdown, which pushed down the prices of agricultural products. In addition, this year there are bumper crops of coffee in Brazil and Colombia with coffee volume increasing by over five million bags over the same period last year. Price trends in the future will continue to depend on the upcoming coffee crop in Brazil. If the output is only about 50 million bags, the prices may be higher. If not, the low coffee prices may last until the end of next year.

However, this year’s crisis in coffee prices (at US$1,200-1,500 per tonne) is not worse than that of the year 2000, when the price was down to US$400 per tonne. In any case, instead of exporting green coffee, Vicofa is encouraging increased processed coffee production to boost the industry’s added value.

Coffee prices are falling in general, however the prices of processed coffee and organic coffee are still high. Could you elaborate on this?

Currently, Vietnamese green coffee is able to meet importers’ requirements. If we meet their specific requirements for product quality, our coffee prices will increase. For example, if green coffee sold to the US does not contain herbicides, the prices could be higher by US$10-15 per tonne. Therefore, the Ministry of Agriculture and Rural Development has banned the use of herbicides to improve the quality of exported coffee.

The organic coffee growing area in our country covers over 300ha, invested by Vinh Hiep Co., Ltd. in Pleiku (Gia Lai Province). Their products, which received US organic certification, are exported to the US at prices three to four times higher than normal green coffee prices and supplies are still insufficient. However, investing in organic coffee requires very large capital sources and the output is not as high as traditional coffee (about one tonne compared with 1.6-2.7 tonnes per ha) so the yield of Vinh Hiep Co., Ltd is not high yet.

In this situation, what measures has Vicofa taken to improve the efficiency of coffee export while still maintaining benefits for farmers?

Coffee is still the main crop in the Central Highlands. With an annual two-percent increase in demand, we should not be concerned about stagnant trade in coffee.

However, local farmers still have to borrow money from banks to buy fertilizers, seeds, pesticides, etc. at high interest rates, which result in higher coffee prices. Vicofa has proposed many times that the Government buy coffee for temporary storage, which would help push up coffee prices. We also asked banks to extend the lending period so farmers do not sell coffee massively, causing prices to fall. We also warned farmers to sell coffee directly to processing enterprises instead of selling coffee via intermediaries for higher prices.

For Vicofa members, the association has recommended that processing enterprises and distributors need to support farmers, maybe by sustaining purchasing prices to help them overcome this difficult period.

To enhance trade promotion for coffee beans, Vicofa organized the third Vietnam Coffee Day in 2019 in Pleiku City. The December 8 to 10 event attracted nearly 70 foreign businesses from 12 countries and nearly 200 Vietnamese enterprises in the coffee industry. The event was expected to promote Vietnamese coffee in Gia Lai - the location of the best Robusta coffee in Vietnam, and organic coffee to numerous buyers around the world.