SOME SOLUTIONS TO BOOST VIETNAM'S COFFEE EXPORTS

1. A few features of coffee production

According to data of the Ministry of Agriculture and Rural Development (MARD), the coffee area of Vietnam in 2020 is 680,000 hectares, down about 2% compared to 2019. Robusta coffee accounts for 93% of the area, the rest is Arabica coffee. In 2021, it is forecasted that the area will decrease to about 675,000 hectares, which is because when coffee prices are low, people tend to turn to intercropping of fruit trees such as mango and durian. According to the Vietnam Coffee – Cocoa Association, the coffee production in the 2019 - 2020 season reached 1.8 million tons, down 5% compared to the 2018 - 2019 season. It is forecast that by the 2020-2021 season, coffee production will decrease by about 15% due to the effects of floods in October and droughts in May and June. Currently, people have harvested about 60-70% of the coffee season 2020 - 2021.

According to market trends, many domestic coffee producers have changed their production methods, in which the link between processing enterprises and farmers is tightened both in terms of planting, caring, harvesting and processing coffee. Typical for that change, on a total area of 600,000 hectares of coffee in the Central Highlands, up to 50% of the coffee growing area is converted into cultivation according to VietGAP and organic standards, thereby improving the quality of raw material areas, serving processing for difficult export markets in the world. Many coffee businesses have shifted from raw exports to a variety of items. Currently, there are 97 coffee processing facilities, 160 roasted coffee processing facilities, 8 soluble coffee processing facilities and 11 mixed coffee processing facilities. As a result, our country's coffee products not only dominate the domestic market but also export to many countries.

2. About coffee export

Coffee is one of 10 key products of Vietnam exported to 80 countries and territories. In 2020 due to the impact of the Covid-19 pandemic, the demand for coffee in the world market decreased, Vietnam's coffee exports added to the second year of losing export turnover exceeding 3 billion USD. According to statistics of the General Department of Customs, in 2020, the country exported 1.57 million tons of coffee, turnover of 2.74 billion USD, average price of 1,751.2 USD / ton, decreased 5.6% in volume, decreased 4.2% in turnover but slightly increased 1.4% in price compared to 2019.

Germany is Vietnam's largest coffee consumption market accounting for 14.3% of the total volume and accounting for 12.8% of the total coffee export turnover of the country, reaching 223,581 tons, equivalent to 350.41 million USD, the average price is 1,567 USD / ton, down over 4% both in volume and turnover, but up 0.4% in price.

Southeast Asian market ranked 2nd in turnover, reaching 160,997 tons, equivalent to 328.36 million USD, down 9.8% in volume and 8.6% in turnover. This was followed by the US market reaching 142,482 tons, or $254.89 million, down 2.6% in volume but up 3.2% in turnover.

Coffee exports in 2020

Source: According to calculations from data published on 13/1/2021 of the General Department of Customs

According to the Department of Agricultural Processing and Market Development (MARD) assessed the domestic coffee price in 2020, decreased unstably in the first 6 months of the year and increased slightly in the last 6 months of the year. Coffee inventories in ports around the world have fallen to their lowest level in years as an optimistic signal that the coffee export market will improve in 2021. Vietnam's major coffee import markets have suffered greatly due to the Covid-19 epidemic and continue to implement high social distancing, increasing demand for coffee at home. Along with that, vaccine testing information will drive the increase in exports.

According to coffee industry experts, coffee exports will have many optimistic signals in the first months of 2021 and expect the whole year to improve.  According to statistics from the General Department of Customs, Vietnam's coffee exports in June 2021 reached 110 thousand tons, worth $219 million, down 15.6% in volume and 10.1% in value compared to May 2021, compared to June 2020 decreased by 13.8% in volume, but increased by 0.6% in value. In the first 6 months of 2021, coffee exports were estimated at 825 thousand tons, worth USD 1.52 billion, down 12.3% in volume and 4.5% in value over the same period in 2020. In June 2021, Vietnam's average export price of coffee was estimated at USD 1,991 per ton, up 6.5% compared to May 2021 and up 16.8% compared to June 2020. In the first 6 months of 2021, the average export price of Coffee in Vietnam was estimated at USD 1,839 per ton, up 8.8% over the same period in 2020.

Regarding coffee export in 2021, one of the favorable factors that can be seen is to make better use of the opportunities from FTA Vietnam - EU (EVFTA) to promote exports. According to the Ministry of Agriculture and Rural Development, with the implementation of the EVFTA Agreement, the EU has abolished taxes on all un roasted or roasted coffee products (reduced from 7-11% to 0%); Processed coffees decreased from 9-12% to 0% after the Agreement came into effect. At the same time, in the 39 geographical indications of Vietnam that are committed to protecting by the EU when the EVFTA is officially put into effect, there will be geographical indications on coffee. This is a huge competitive advantage for Vietnam's coffee industry compared with competitors in the EU market.

In addition to the advantages, Vietnam's coffee industry also faces many difficulties, in the export market, Vietnamese coffee is evaluated only in terms of output but in terms of unrecognized quality, the value of Vietnam's coffee beans is not high. This is because Vietnamese coffee is subject to many fluctuations in the world coffee market; low value-added coffee product structure; coffee exports accounted for the vast majority, new deep processing reached 12%. Moreover, there is a shortage of containers for export, so the tariffs are likely to increase in the near future. In addition, Vietnam will continue to have to compete with other exporting countries, especially Brazil. With a sharp increase in area, the coffee production of Brazil - the world's largest coffee producer, will also make it difficult for Vietnam's coffee exports.

Along with the difficulties of the export market, there are also internal difficulties of the Vietnamese coffee industry such as: Production efficiency, business of the coffee industry is low and precarious; enterprises purchasing, processing and exporting depend entirely on coffee exchanges; processed coffee products, Vietnamese coffee brands in the world export market have not achieved expectations; the state of coffee trees degeneration is rapidly increasing; coffee production is disadvantaged by climate change.

3. Solutions to boost coffee exports

To take advantage of opportunities, limit difficulties, support the coffee industry to increase value, maintain the world's second position in the coming time the coffee industry needs to focus on solutions such as:

Firstly, relevant ministries, sectors and localities need to have solutions to overcome difficulties, support farmers and enterprises to attract investment, apply science and technology, improve the quality of human resources; at the same time encourage, strengthen links and cooperation in coffee production and business with the aim of stabilizing exports, maintaining and expanding the market.

Secondly, continue to review and supplement the plan to replant aging, low-yielding and poorly accepted coffee replanting programs in the period of 2021 - 2025. Accordingly, reducing the area to 670 thousand hectares, output from 1.8 to 1.9 million tons / year; development of key production areas in the Central Highlands and Southeast. Promote replanting and grafting of aging coffee gardens; use 100% of high-quality, productive coffee varieties; interplanting industrial crops, perennial fruit trees with qualified replanted coffee areas; increase investment in deep processing to improve the quality of coffee for export and domestic consumption.

Thirdly, encouraging coffee processing enterprises to invest in modern processing technology lines; focusing and paying more attention in building product brands, developing promotion, marketing strategies, positioning brands in accordance with the capacity of each enterprise. The Government supports enterprises to build and develop their brand through communication campaigns, image promotion, training programs, guidance, capacity building, product format and branding.

Fourthly, coffee enterprises need to actively attend international fairs and exhibitions held at home and abroad to introduce products and find export customers. Simultaneously, update information and commercial news to promptly adjust production and business activities of their enterprises in accordance with the signals of the market.

Fifthly, coffee exporters need to effectively implement the FTA Agreements Vietnam has signed into coffee export activities, thereby increasing competitiveness, expanding the market and improving the brand value of Vietnam's coffee export products.

Nguyen Kieu Ly

Department of Information, Library and Trade Promotion - VIOIT