Crisis in a Coffee Cup

Vietnam’s Coffee Growers See Hope

Vietnamese coffee trader sifts beans
Vo Viet Dam, a coffee trader, sifts coffee beans at his house in Buon Ma Thuot, in the highlands of Vietnam (Photo: AFP).

An improvement in the price of coffee beans is giving hope to Vietnamese farmers who have suffered steady losses over the last five years despite consecutive bumper crops. Coffee growers faced lean times last year as oversupply on world markets saw prices plunge, but Vietnam’s coffee growers say their fate is changing, thanks, in part, to a campaign by Oxfam.

Oxfam is calling for the adoption of a new plan put forward by the International Coffee Organization to take some lower-grade beans off the market, and for the top four coffee-roasting multinationals to pay a fair price for the beans.

Oxfam says world coffee prices are at a 30-year low because 8 percent more coffee is being produced than consumed. It says multinational coffee companies are making large profits by charging consumers in rich countries 1,500 percent more than farmers in poor countries are paid for their beans. Coffee prices on the world market average US$1.10 a kilogram, while production cost is around $1.76.

“The worst may be over for embattled coffee growers like us, with prices finally rising off record lows,” said Nguyen Trong, owner of nearly 20 hectares [49 acres] of coffee plantation in Daklak province in the country’s central highlands.

“The surging prices are due to the increase of coffee prices in the world market and the decrease of the country’s coffee output,” said the chairman of the Vietnam Coffee and Cocoa Association, Doan Trieu Nhan. Nhan added this could be seen as an early sign that Oxfam’s campaign is working.

“The Oxfam scheme is positive, as it truly reflects the current coffee-market situation, taking into account the livelihoods of farmers and producers,” he said, adding that Vietnamese coffee growers have heartily welcomed the scheme.

For farmers who have made the switch from farming low-grade robusta beans to high-grade, high-yield arabica, the investment is now beginning to pay off. But for many others who still farm low-grade beans, the pickup in prices has some distance to go before they see their fortunes turn around. Vietnam is today the world’s second-largest coffee grower and the largest grower of robusta.

“Farmers in developing countries such as Vietnam are now selling their coffee beans for much less than they cost to produce, and they deserve more of the industry’s profits,” Nhan said. The 2001-02 crops recorded the highest output ever reached in Vietnam, but coffee prices were on average half of those of the 1999-2000 crops.

The Ministry of Agriculture and Rural Development has offered coffee growers extra funding and exemption from paying land-use taxes. But growers in the largest coffee-producing province, Daklak, say the industry’s problems can be solved only if bean prices rise above production costs, which currently stand at $530 to $600 per ton.

Vietnamese companies are exporting coffee at $300 per ton, which means farmers are getting an even lower price when export companies buy their produce. This has led to accusations from other big coffee-producing countries that Vietnam’s cheap coffee is one of the reasons for the downturn in world coffee prices.

Local economists forecast that Vietnam’s coffee prices will increase only slightly this year because of large stockpiles, but prices are expected to rise quickly after 2003 due to a sharp reduction in coffee output and productivity.