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To prevent being excluded from the coffee supply chain

To prevent being excluded from the coffee supply chain

Tuesday 11, 02 2020
The application of the blockchain method in the coffee supply chain has been started and become more popular in corporations and nations which are used to supply chains.

The blockchain technology is changing the industry and the coffee supply chain at a fast pace. However, in Vietnam, it seems that the majority of coffee farmers and business owners haven’t caught on with these changes yet.

Losing the market despite low prices

​An article published prior to the Lunar New Year citing the indexes of the Ministry of Agriculture and Rural Development shows that the Vietnamese coffee industry is losing its Thailand export market. Even though in the first 11 months of 2019 Thailand had purchased nearly 39,000 tons of coffee from Vietnam with the price of nearly 69.5 million USD, when compared to the same period in 218, this number has shown worrying decreases of 35% in terms of quantity and of 41.5% in terms of value. The article also states that Thailand is shifting its coffee import to other markets such as Indonesia, Malaysia, the US, and Brazil, etc.

>> Vietnam’s coffee industry: yield may decrease by 15% in crop season 2019 - 2020

What is difficult to understand is that the average export price of Vietnamese coffee to the Thailand market is 1,790 USD/ton while that of Indonesian coffee is 1,991 USD/ton.

Explaining the loss of the export market, there have been people saying that Vietnamese coffee has not met the quality standards despite being sold at the cheapest prices. However, according to the writer, it is necessary to note that the current coffee trading is reaching a turning point. Consumers and store chains want to know clearly who produces their coffee, how it is made, how it reaches consumers. In other words, they want to have transparency.

In the past, there was a theory that whoever had the highest production would get to control the market and the prices. However, it has never been a simple task to control the rights of buyers, especially ever since commercial commodities started to be traded through derivatives such as crude oil, gold, soybeans, corn, cotton, cocoa ... and coffee is not excluded.

Sellers (farmers) and exporting countries all have to follow the wills of buyers and consumers. With huge budgets, consuming markets saved up a huge amount of coffee as the prices dropped to prevent crop failure and high prices. This “supply chain” trading method is still being applied. It is one thing for the prices to drop when there is a crop success, but currently, it is becoming more and more popular for them to drop even after a crop failure.

While finding ways to get rid of the "big fish eat small fish", many people in the coffee industry have been seeking to share the power ever since the technology of "chain-block" (blockchain) appeared.

A quick application of the blockchain method

To prevent being excluded from the coffee supply chain

The application of the blockchain method in the coffee supply chain has been started and become more popular in corporations and nations which are used to supply chains.

Using the blockchain technology in the coffee business helps buyers manage their supply chains and approach all the data related to the coffee, ranging from the production to the delivery. Blockchain is used to save information regarding the coffee supply chains, including the farmers, the origins, the prices, the buyers, and the duration between the production and consumption. Once integrated into the flow of the supply chains applying blockchain, the unregulated goods will no longer be able to compete like it used to.

It only takes a smartphone connected to 3G, 3G, or an input program which is suitable for the supply chain system picked by the farmers for them to get in touch with, as well as to share and to receive information from the last buyers, including prices and comments of the consumers.

It is wrong to assume that the blockchain technology is applicable for specialty coffee, which is a very small niche sector of this $100 billion market, which is the second-largest transaction in the world.

Several major roasters that buy huge quantities of goods each year in manufacturing countries have joined hands with blockchain technology vendors to prepare for new business activities over the next few years.

Thus, the slow entry into the "blockchain" line also means that coffee farmers and exporters are voluntarily asking to be excluded from the supply chain and more accurately separated from the global coffee market.

>> In early 2020, coffee prices constantly fluctuate

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