The Department of Industry and Trade of Gia Lai province has just organized a workshop on coffee price risk prevention and coffee trading methods on the commodity exchange. The establishment of a special coffee trading floor is of particular interest.
Aiming to establish an exchange
Vietnam currently ranks second in output after Brazil, ranking in the top 5 in the agricultural sector with the highest export turnover of the year. In 2023, our country exported about 1.61 million tons of coffee, earning 4.18 billion USD. The first half of this year exported 1 million tons of coffee, earning nearly 2.4 billion USD. The Central Highlands region, including Gia Lai province, is one of the key coffee production localities of the country in terms of area, output and outstanding value.
Ms. Dao Thi Thu Nguyet, Deputy Director of Gia Lai Department of Industry and Trade, said that the province has nearly 99 thousand hectares of coffee, with an average yield of 30 tons/hectare, which is the province’s main export agricultural product. In 2022 alone, this province’s coffee exports earn 490 million USD, accounting for nearly 71% of the total export turnover of agricultural products.
Workshop on coffee price risk prevention and coffee trading methods on the commodity exchange has just been held
However, the coffee market is highly volatile, coffee prices often change. This has caused many challenges for farmers, buyers, processors, exporters, importers and retailers.
Mr. Tran Van Binh, Director of Saigon Invest Commodity Trading Joint Stock Company, said that the establishment of a coffee exchange in Gia Lai province will bring many benefits, it will be a place to trade coffee futures contracts. coffee, through which supply and demand meet, forming prices. The price of coffee on the floor is often considered the reference price for the market.
Coffee producers, exporters, and importers can use the exchange to protect themselves against price fluctuations, and can buy or sell futures contracts to lock in profits or minimize the risk of losses. All transactions on the exchange are recorded and made public, helping to increase market transparency and reduce asymmetric information.
The exchange also creates a large market with many participants, ensuring liquidity, helping investors easily buy and sell futures contracts.
The establishment of a coffee trading floor in Gia Lai will help farmers sell products at reasonable, stable prices and increase their income. Farmers will have the opportunity to access market information and improve production skills. Besides, it also attracts domestic and foreign investors, creating opportunities to develop coffee processing and export activities. Through that, connecting with coffee growing areas of provinces such as Dak Lak, Dak Nong, Kon Tum….
What benefits do coffee producers get?
Establishing a coffee trading floor is an ambitious and potential idea, especially when Vietnam is one of the largest coffee producing countries in the world. However, this is a complex process, requiring careful preparation and close coordination of many stakeholders.
In particular, the establishment of an exchange faces many challenges such as: there is no complete and specialized legal framework for coffee trading activities; It is necessary to invest in building a modern digital infrastructure system to support online transactions, manage data and ensure market transparency. Establishing and operating an exchange also requires large capital to invest in technology, human resources and marketing activities…
When participating in the coffee trading floor, what benefits will interested people and businesses receive?
Mr. Nguyen Huynh Phu Lam, Director of Classic Gia Lai Coffee Joint Stock Company, said the trading floor needs to attract people, cooperatives, and businesses to participate. When someone participates, the exchange will collect fees and receive benefits. However, it is necessary to be clear what benefits buyers and sellers gain from participating.
“Previously, the Buon Me Thuat coffee exchange, Dak Lak province was established without success. Coffee businesses like me want to hear and look directly at the problem of failed exchanges. To From there, we have dissected to find the best trading floor model for people and businesses to participate in” – Mr. Lam shared.
Mr. Tran Van Binh, Director of Saigon Invest Commodity Trading Joint Stock Company, said many countries around the world have succeeded in exporting coffee to international exchanges but Vietnam has not. To achieve efficiency, the trading floor needs careful preparation, investment in building warehouses, transportation systems, and quality testing laboratories. It is necessary to train a team of highly specialized staff in transactions, management, and marketing. However, to be successful, investment and efforts from both the government, businesses and people are needed.
“Establishing and operating a coffee exchange in Vietnam not only requires large capital and management experience but also requires support from the state. The Vietnamese government has and is having policies to encourage and create favorable conditions for this activity, contributing to developing the domestic coffee market and enhancing the value of national agricultural products” – Mr. Binh shared.
Need cooperation
Mr. Bui Nguyen Anh Tuan, Deputy Director of the Domestic Market Department (Ministry of Industry and Trade), said that in order to bring coffee products to the commodity exchange, standards and quality of goods must be put first, through That adds value to Vietnam’s agricultural industry.
However, to organize activities and operate a commodity exchange, not only the agricultural sector but also the cooperation from fields such as logistics, finance, warehousing… as well as helping create jobs and contribute to local economic development.
