On April 11, in Ho Chi Minh City, the Vietnam Coffee – Cocoa Association (VICOFA) held an expanded executive committee conference to listen to the difficult issues and challenges that businesses in the country face. The industry faces strong fluctuations in coffee prices as recently.
Worried about losing credibility
Mr. Do Ha Nam, Chairman of the Board of Directors and General Director of Intimex Group Joint Stock Company, Vice Chairman of VICOFA, information as of the end of March 2024 (ie the first 6 months of the 2023-2024 coffee crop year), Vietnam exported a total of more than 956,000 tons of coffee, worth more than 3 billion USD.
At the beginning of the coffee season (October 2023), the coffee price was only 58,000 VND/kg, but now it has increased to 105,000 VND/kg, twice as high. Prices increase rapidly and are too high, creating many challenges for businesses when businesses need large capital sources but banks’ credit limits for businesses remain the same. The rapid increase in prices is associated with high risks for businesses purchasing goods for export through agents and traders. Some purchasing agents and businesses did not deliver goods on time as stipulated in the sales contract, causing great damage to buyers and the risk of discrediting the Vietnamese coffee industry” – Mr. Do Ha Nam stated. .
At the conference, a representative of Neumann Gruppe Vietnam Co., Ltd. said that it has been doing business in Vietnam for many years, accounting for 15% of Vietnam’s coffee export market share. This year, Neumann Gruppe Vietnam encountered serious problems when partners delayed delivery or did not fulfill contracts. This is having a knock-on effect on roasters who are customers of the business. “With this situation, roasters around the world may switch to buying coffee from other countries” – a representative of this FDI enterprise warned.
A representative of JDE Vietnam Company reflected that some suppliers do not deliver goods to businesses but sell them to other partners at higher prices, creating a bad precedent in the market. Currently, Vietnamese coffee is priced too high and may be replaced by cheaper Indonesian coffee.
Similarly, Mr. Nguyen Dang Mien, representative of Nestlé Vietnam Company, also said that although the company has built a sustainable coffee program in Vietnam since 2011, in the past 2 years, due to disruptions in the raw material supply chain, Nestlé is forced to import raw materials from other countries to stabilize production.
Regarding this issue, Mr. Do Ha Nam further informed that in the 2022-2023 coffee crop year, Vietnam had to import 200,000 tons of coffee due to a shortage of domestic supply. This year, this situation may increase because domestic inventories are running out while there are still 6 months left until the new harvest.
Rising coffee prices benefit farmers but also pose many challenges for the supply chain. Photo: VAN ANH
Lessons for the next season
Mr. Do Ha Nam said that during the coffee “price storm”, many suppliers had to sell their houses to buy high-priced goods and execute low-priced contracts to maintain their credibility. “Of course, there are also those who take advantage of the situation for personal gain, who are “worms spoiling the soup”. I know that there are trade disputes that have been sent to court, awaiting trial” – Mr. Do Ha Nam informed.
Mr. Le Duc Huy, General Director of Dak Lak 2/9 Import-Export Company Limited (Simexco Daklak), likened the coffee industry to having just experienced a “cataclysm”. Most Vietnamese export enterprises have been very brave when implementing contracts; The rate of contract failure is low, mainly from small sources of supply.
“For the 2023-2024 coffee season, FDI enterprises bought coffee too early, starting from June 2023 (when coffee prices were still low – PV) while Vietnamese coffee exporters bought from later. when harvesting, starting from November 2023. The huge price difference between the two times has caused many risks and this is a big lesson for the next crop” – Mr. Huy analyzed.
Mr. Thai Nhu Hiep, Director of Vinh Hiep Co., Ltd., Vice President of VICOFA, said that in the past 20 years, coffee prices have always been low, farmers are not profitable, so the conversion of crops is very strong. This causes a shortage of supply, pushing prices up. “Coffee output among people is currently very small. In order for farmers to stick with coffee, they must have good profits, otherwise they will continue to switch to durian and passion fruit” – Mr. Hiep emphasized. .
Mr. Le Thanh Tung, Deputy Director of the Department of Crop Production in charge of the South – Ministry of Agriculture and Rural Development, said that the unit had a survey of the Central Highlands coffee raw material areas. Mr. Tung believes that next crop’s coffee output will not be in short supply. “However, to develop a sustainable coffee industry, all parties need to work closely together to stabilize output and quality, avoiding too large fluctuations like recently” – Mr. Tung suggested.
Avoid damage that accumulates on one side
Mr. Nguyen Nam Hai, Chairman of VICOFA, noted that export enterprises should minimize long-distance selling and especially long-distance buying to avoid the risk of having to buy high-priced goods for low-priced contracts or not being able to fulfill contracts. copper. For sales contract disputes that have occurred, it is recommended that buyers and sellers negotiate and agree to share risks, prices as well as progress and delivery time when coffee prices increase. suddenly high, avoid cumulative damage to one side.
On behalf of VICOFA, Mr. Nam Hai suggested that the bank should increase loan limits and prioritize interest rates for coffee import-export businesses. Localities in raw material areas need to propagate and warn farmers, local agents and traders to minimize the practice of “buying far, selling far” to avoid high risks when prices increase. Localities also need to warn about expanding coffee growing areas when prices rise, to prevent a subsequent coffee surplus crisis.
