Ha Lan-Viet Nam Coffee Limited Company, a 100 percent Dutch invested company in Buon Ma Thuot, Dak Lak Province. — VNA/VNS Photo Hong Ky

HCM CITY (Biz Hub) — Coffee output from the 2013-14 crop will fall by 15 per cent over the previous one due to unfavourable weather conditions and a high proportion of old trees with low yields, according to the Viet Nam Coffee and Cocoa Association.

In the last crop, drought and diseases had seriously affected productivity and quality of coffee in plantation areas. The situation would continue with this crop, said Nguyen Nam Hai, the association's deputy chairman, at a conference in HCM City yesterday.

Currently, about 25 per cent of coffee cultivation area has old trees that have low yield and unstable quality, according to Hai.

The sector has responded to this situation with a plan to replant old coffee trees, but it has not been very successful because of a lack of capital and seedlings.

Delegates at the conference said that since replanting takes up a lot of time and capital, the Government should provide more incentives for farmers, including preferential loans.

Le Quoc Doanh, deputy Minister of Agriculture and Rural Development, said the ministry would work to develop more high quality coffee seedlings that the farmers could use.

Exports fall

Viet Nam's coffee exports from the 2012-13 crop - from October last year to September this year – have fallen in terms of both volume and value, with 1.4 million tonnes being exported for US$3.03 billion, Hai said.

This represented a reduction of 11.2 per cent in volume and 10.3 per cent in value over the previous crop, he added.

For the last crop, Germany was the biggest buyer of Vietnamese coffee, followed by the US, Spain, Italy and Japan.

Hai said coffee firms were in trouble because of calling prices.

Luong Van Tu, the association's chairman, said "coffee prices have reached a four-year low in the world market."

In the domestic market, the price has dropped to more than VND30,000 a kg, the lowest in the last three years, he said.

He attributed the fall to supply being higher than demand and many coffee speculators shifting their investment to other sector.

The coffee industry is going through a very difficult stage, with many firms incurring losses and suspending operations, Tu said.

He said the situation requires relevant government ministries, agencies and enterprises to work together and address problems, failing which exports will continue its downward trend.

The association suggested that the Government consider allowing the sector to stockpile 200,000-300,000 tonnes of coffee from the 2013-14 crop to prevent prices from falling further in the domestic market, negatively affecting coffee growers.

Coffee firms also called on the Ministry of Agriculture and Rural Development and the association to establish close ties with their counterparts in other major coffee producing countries to share information.

They wanted the Government to intervene and resolve problems related to the value-added tax.

For his part, Doanh urged coffee firms to focus more on improving processing technology to add value to their products.

FDI businesses take over

Domestic coffee producers are facing domination from foreign direct invested (FDI) enterprises in the local market.

Nguyen Viet Vinh, general secretary of the Viet Nam Coffee Cocoa Association (VICOFA), said 13 FDI businesses accounted for a half the country's total export coffee volume, creating difficulties for Vietnamese enterprises.

Vinh said FDI firms enjoyed preferential taxes and low interest rates on loans from foreign parent companies. This enabled them to be very active in buying coffee while Vietnamese businesses had to battle slow value-added tax refunds and were forced to accept loans at high interest.

Statistics from the association showed that the FDI sector's coffee exports in the 2011-12 crop made up a half of the country's export compared to only 20 per cent in 2008-9. In 2009-10, the rate was 31 per cent and in 2010-11, 38 per cent.

Vinh said the percentage would be higher for the 2013-14 crop as Viet Nam's big coffee exporters had had problems receiving the VAT refund, resulting in a lack of capital.

Last week, coffee price in Central Highlands provinces fell sharply from VND39,000 to VND32,000 per kilo. However, domestic coffee producers were not able to buy it for stock because of the slow VAT refund.

Some experts said FDI enterprises would rush to buy the coffee. Domestic companies would be forced to buy coffee from FDI firms at the higher prices to meet their export contracts.

Figures from the Ministry of Industry and Trade also revealed that the FDI sector has dominated the export turnover of some key export products.

They made high export turnover in agricultural and aquatic products, which were once the strength of domestic firms. In the first 10 months of the year, export turnover of FDI enterprises in the coffee industry was US$0.67 billion out of the total of $2.2 billion.

Economist Bui Kien Thanh said FDI firms had waiting export markets while Vietnamese companies lagged behind.

Thanh said the Government should review all policies ranging from monetary, taxes and fees to make sure they did not deprive domestic businesses. — VNS