Market forecast
Occupying 10 per cent of world market coffee share, Vietnam ranks secondly only to Brazil (with 30 per cent) in tons of coffee exported nationally, but above Brazil in Robusta coffee export, as the world leading Robusta exporter. However, there is no authority in Vietnam currently forecasting the coffee market.
Because of fluctuating demand, supply and price, coffee is a susceptible commodity in the market. Both Vietnam and the world have coped with the dropping coffee price for a long time. Before 2004 a massive increase in coffee plantations, and then the sudden destruction of coffee trees in some areas negatively impacted farmers’ lives and coffee export turnover. However, up to now, each enterprise has maintained unit production, making them passive in response to price, supply and demand in the world.
Doan Trieu Nhan, deputy president of the Vietnam Coffee-Cocoa Association, confirmed that despite close ties between the Vietnamese market and the world market, it is too late for Vietnam to only react after world market turmoil, it must be more proactive. However, it will take Vietnam a long time to collect its own statistics and hold the initiative in the coffee industry.
Does poor quality result from low standards?
In the 2005-2006 coffee crop, the International Coffee Organisation (ICO) carried out coffee classification in 10 different ports in Europe, and over 72 per cent of the 1,485,750 rejected coffee bags, from 17 exporting countries and regions, was from Vietnam.
As explained by Doan Trieu Nhan, Vietnamese coffee quality is still assessed using Vietnam’s old standard 4193-93, which evaluates the product based on the three criteria of moisture level, the rate of broken coffee-beans, and impurities. The new standard 4193:2005 has not been implemented, so testing coffee quality before customs clearance has, up to now, not been obligatory in Vietnam.
“We appeared to export a poor quality mix of coffee which might have been rejected,” added Nhan. As a result, the price of good coffee is often equal to the poor one. Coffee importers only select good quality beans for sale at a high price, and return the rejects. Even Robusta of Vietnam, naturally high quality, after the process of planting, picking, processing and transporting, has its quality lowered.
The world rate of coffee product in compliance with technical standards in 2003-2004 (submitted to the ICO) was 31.6 per cent, increasing to 73.1 per cent in 2005-2006, but Vietnam lies in the remaining 26.9 per cent not in compliance. The quality management of Vietnamese coffee export is so poor that a huge volume of coffee exports, including the rejects, is often bargained away at basement prices.
To increase coffee prices and added value, Vietnam gradually has to replace raw coffee exports with processed exports. Dang Kim Son, rector of the Institute of policy and strategy of rural agriculture development, said this process will be accelerated since some domestic corporations such as Trung Nguyen coffee company have started producing processed coffee. Also, Son forecast the quality of coffee products will be improved to raise competitiveness, when foreign investors are attracted to the market.
As the second ranking coffee exporter in the world and an ICO member, although not having adopted ICO principles, Vietnam's implementation of resolution 420 on coffee quality is closely followed by 25 other exporting countries.