It is about two weeks left for the ending of coffee crop year 2012 and 2013, with the whole crop’s estimated export volume from 1.41 to 1.42 million tons, turnover of nearly USD$3 billion which is 10.5% lower in volume and value as compared to crop year 2011 and 2012. The market shows that the coffee industry has increasingly been vulnerable.
According to the Ministry of Agriculture and Rural Development, the volume of coffee exports in the first eight months reached 974 thousand tons, turnover of USD$2.09 billion, which are down 23.2 % in volume and 22.5 % in value the same period in 2012. Coffee crop year starts from Oct 1st of previous year to the end of September next year, the export volume accumulated from the beginning of crop year 2012-2013 to the late August 2013 has been reached USD$1.37 million tons of coffee. It is estimated that coffee export volume will reach 1.41 to 1.42 million tons.
Phase of coffee crisis
In the context of difficult market but coffee export average price[s] of the whole crop was still USD$ 2,142/ ton, up 1% as compared to the previous year, reflecting the efforts of the coffee industry. However, in the previous year coffee prices were littered around 40-42 million dong/ ton but coffee prices have fluctuated up and down very erratically this year.
Vietnam has experienced a decade of sustainable growth with coffee export of around USD$3 billion per year. Looking at the results of the late season, the result is similar to the 2010-2011 year, seems not much worry. However, in the context of the prices of agricultural commodities which have had huge differences compared to 5 years ago, the price of coffee is still “being” in a position.
In 2007, domestic coffee prices hit a 40 million dong/ ton; this is now hard to exceed this level, even now falling below 37 million dong/ ton. While the cost of fertilizer, labor force, water for coffee has increased more than 2 times as compared to 5 years ago to the extent that coffee growers increasingly gain less profit or even get loss.
Reuters said that the coffee industry in Vietnam was in severe crisis for several reasons: tax evasion, poor management, poor liquidity, high interest loans and credit tightening.
As the report of the Ministry of Agriculture and Rural Development, the coffee sector’s bad debt currently stands at 8.000 billion, accounting for 60% of total outstanding loans of the whole industry. Among 127 coffee export businesses in 2012, there have been 56 units which stopped doing business or moved to other business activities due to the lack of bank’s debt payment.
Foreign coffee traders express that many coffee exporters in Vietnam were “digging his own hole” because they heavily depend on loans and lack the skills of trading in coffee futures market.
Additionally, “in Vietnam’s coffee industry has also appeared many destructive “worms” which are “match” traders who trick coffee exporters with low-quality coffee, forcing them to sell coffees at low prices to cut losses” says Joyce Liu, an investment analyst at Phillip Futures in Singapore.
Coffee Control Division waited to change the situation
Reuters also criticized the “half-done” in implementing regulatory policies to coffee industry in Vietnam. The government has decided to reschedule debt of coffee businesses from 12 months to 36 months; however, this move is more beneficial for banks as in reality while interest rates were low, only those who start a new loan get the interest rate between 11% to 12 % /year, many businesses those who cannot settle their previous loans are still subject to high interest rates from 16.5 to 17 %/ year.
On the other hand, policy of temporary storage purchasing at sometime was executed to keep coffee prices not going down. However, the execution of this policy all has been failed due to the problems in logistics and delayed disbursement.
More than one month ago the Ministry of Agriculture and Rural Development decided to formally establish the Coffee Control Division which is responsible for advising and coordinating the resources of the ministerial agencies and related individuals and organizations in performing the tasks of planning, planting, processing and consuming of coffee and etc.
However, the Division has not still implemented any execution yet until now. The expectations of reforming coffee sector must be waited. It is still waited to see how the Division changes the situation.
Coffee crop year of 2013-2014 is facing a more difficult market as compared to last year. Unlike previous years, at the transition of last season and new-coming season, coffee prices are always rising and at a high level but this year the prices are completely opposite when prices have not increased even in a decreased trend. At the same time of last year, domestic coffee prices reached 43-44 million dongs/ ton.
But now, when there are about two weeks left for the new harvested crop, local coffee prices in the Central Highlands are only 36.7 to 37 million dongs/ ton, the lowest in the last 16 months. Businesses say that this price – flatted is ideal for coffee purchasing and this is a good time for businesses with strong financial resources to buy in for storage.
Nevertheless, most trading activities are being fallen into quite because farmers, traders and businesses dare not to take risks whilst the market signals of new crop are still unclear.
While the coffee crisis in Vietnam hasn’t still found an escape yet, Indonesia – the world’s second largest Robusta coffee producer may seize this opportunity to boost their export meanwhile this country’s coffee production is forecasted to reach an ever-achieved record in this crop.
»Translated by wscafe.com> original source by VnEconomy.vn, author: Chuong Phuong, for Vietnamese version, please see it here. W/scafe takes its all responsibilities of the accuracy and exactness of the translated documents.