The rapid increase in coffee prices is currently causing significant challenges for Vietnam's coffee industry, leading to fierce competition and potential contract breaches.

This was shared by Mr. Đỗ Hà Nam, Vice Chairman of the Vietnam Coffee and Cocoa Association (Vicofa) and Chairman of the Board of Intimex Group, at an expanded executive committee meeting of Vicofa held on April 11.

According to statistics from Vicofa, in March 2024, Vietnam exported approximately 185,281 tons of coffee, with an export value of nearly 681 million USD, down 11.9% in volume but up 41.1% in value compared to the same period last year.

Cumulatively, for the first six months of the 2023-2024 coffee season (from October 2023), Vietnam exported over 956,000 tons of coffee, with a revenue of more than 3 billion USD. The majority of the exports were Robusta coffee (over 825,000 tons), with a value of over 2.3 billion USD.

Mr. Đỗ Hà Nam noted that the rapid and significant increase in coffee prices, which have nearly tripled, is causing numerous challenges for businesses. Specifically, companies need to mobilize large amounts of capital, but the credit limits provided by banks have not increased accordingly.

Additionally, the swift price rise comes with high risks for companies purchasing for export through agents and traders. Some local purchasing agents and companies have failed to deliver on time as stipulated in sales contracts with export processing companies and FDI enterprises, despite discussions to share risks. This has resulted in significant losses for buyers and damaged the reputation of Vietnam's coffee industry.

Some businesses have indicated that with the current high coffee prices in Vietnam and issues with delayed or non-fulfillment of delivery contracts, they may soon have to import coffee from other countries to roast and process in Vietnam.

Reducing Forward Buying and Selling to Avoid Risks

A representative from 2/9 Dak Lak Import-Export One Member Company Limited suggested that domestic purchasing units, FDI enterprises, and large roasters should coordinate more closely during each season's purchase period to avoid a rush to buy early out of fear of shortages.

In recent times, some FDI enterprises have bought coffee too early, starting in June 2023 (when prices were still low), while Vietnamese coffee export companies began purchasing after the harvest, starting from November 2023. The large price disparity between these two periods has caused significant risks, providing a valuable lesson for the upcoming season.

Mr. Nguyễn Nam Hải, Chairman of Vicofa, advised farmers, agents, and export companies to minimize forward buying and selling to avoid risks. For existing purchase contract disputes, he recommended that buyers and sellers negotiate and agree to share risks, costs, and delivery schedules when coffee prices suddenly spike, to prevent the burden from falling on one side.

Vicofa will continue to work with ministries and departments to develop sustainable coffee solutions for farmers and financial solutions to help companies stabilize prices.

"Currently, Vietnam has the safest ratio when exporting to Europe with a record of sustainable coffee farming, so export companies should maintain this advantage," Vicofa emphasized.

Source: Vietstock