Van Thanh Huy, Chair of the Vietnam Coffee and Cocoa Association (Vicofa), talks about the plan in the following interview. Van Thanh Huy, Chair of the Vietnam Coffee and Cocoa Association (Vicofa)
In 2002-2003, coffee prices saw big fluctuations, and enterprises found out that they faced big risks with the price-fixed contracts. Since the 2005-2006 crop, Vietnamese enterprises have always used price-to-be-fixed contracts while trading Robusta on LIFFE (London International Financial Futures and Options Exchange), Arabica on NYBOT (New York Board of Trade). However, transactions have still been carried out through third parties.
What has Vicofa done to put the CME plan into action?
The idea has received the support of the government and state agencies. Most recently, deputy prime minister Pham Gia Khiem has assigned Mard, the Ministries of Foreign Affairs, Industry and Trade, Dak Lak People's Committee, the Vietnam Chamber of Commerce and Industry, and Vicofa to compile the detailed project. We have been given autonomy in contacting and working with CME on putting Vietnam's coffee into transactions. Coffee will be the 'pioneer', and if successful, other farm produce will also be brought to trading floors. On August 22, Mard deputy minister Luong Le Phuong had a meeting with Vicofa to discuss the issue. In the immediate time, we will set up a committee in charge of compiling the project on cooperating with CME.
In the second quarter of the year some coffee traders went to the US to learn about various trading floors. What was the assessment?
Our trip was from June 26-July 6. The delegation consisted of 18 members, including representatives of the ministries of agriculture and trade, Vicofa and association members. We visited NYBOT and CME. Established in 1870, CME is now the world's biggest forward trading floor, and even more bustling than the floors in New York, where important products are being traded. We had a meeting with CME's managers. They were pleased to hear about our plan and expressed their hope of seeing Vietnamese coffee on the trading floor soon. CME's Asian forward transaction centre's director promised to help Vietnam train officials for the trading floors. We will send several officials to Chicago first, and then CME will send experts to Vietnam to help train officers in Vietnam, which will help save on expenses.
What about the technical and material facilities to put Vietnamese coffee into transactions on CME?
In November 2004, the construction of the Buon Ma Thuot Coffee Exchange Centre started, which was designed to become a trading floor for all coffee trading enterprises, individuals and institutions. The first transactions were made at the end of 2006, when the infrastructure items were completed. However, the transactions being carried out here are most local. I mean, the traders mostly come from the region (Dak Lak is the capital city of the coffee growing region) and other localities of Vietnam. We plan to organise a seminar in September to collect ideas about the regulations and operations of the centre.
If the cooperation with CME goes smoothly, the Buon Ma Thuot Exchange Centre will be able to place orders directly with CME in March 2008, and there will be no need to go though any third party. Currently, this work still needs to be carried out through third parties, like Techcombank, Bidv or ATB. The most difficult technical problem is the building up of software for the centre. We are considering hiring a professional company to write the software. In the immediate time, orders will still be placed manually. Vicofa suggests not signing contracts in large quantities.
What is your assessment about Vietnam's coffee exports in 2007 and the next crop? Does Vicofa have any suggestions for enterprises about how to ensure supplies for export?
The coffee price has remained high this year, at US$1,430 a tonne, higher than 2005's level at US$1,066. Vietnam has exported 900,000 tonnes so far this year earning US$1.2 billion. I think that coffee exports will bring about US$1.5 billion this year. The price slightly decreased by US$100-200 a tonnes in the last three weeks, but I don't think this is a worrying sign. Experts have forecast that Brazil's output would be 33-35 million bags in the 2007-2008 crop due to the poor harvest. The export coffee price may drop in the fourth quarter, but will recover soon in the second quarter of 2008. Vicofa has advised enterprises not to sign contracts in large quantities, 40,000 tonnes would be fine instead of 120,000 tonnes as previously. Coffee should be reserved for the contracts in the future.