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

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

Thursday 06, 02 2020
The increase of export of well-processed coffee has helped the Vietnamese coffee industry to be more stable in the "storm" of prices.
Due to the coffee price crisis, some farmers have turned to other crops. In addition, the Central Highlands region has just experienced floods, causing inundation of many coffee-growing areas.
 

Yields may decrease as people shift to planting other crops

On the sidelines of the Vietnam - China Business Forum event: Cooperation in tea and coffee production and consumption, Mr. Luong Van Tu, Chairman of the Coffee - Cocoa Association said that due to the impact of the recent price crisis, many farmers have switched from coffee to other crops. In addition, the Central Highlands region has just experienced floods, causing inundation of many coffee-growing areas. "Therefore, in the 2019-2020 crop, the Vietnam Coffee - Cocoa Association forecasts that the coffee output will decrease by about 15% compared to the 2018-2019 crop." - Mr. Tu said.

According to the International Coffee Organization (ICO), Vietnam's coffee output in the 2018-2019 season is estimated to decrease by 1.3% over the previous crop to 30 million bags (1 bag is equivalent to 60kg). Thus, according to forecasts of the Vietnam Coffee - Cocoa Association with ICO data, the coffee yield in the 2019-2020 crop will be about 25.5 million bags. "Recent studies show that drinking coffee may help increase life expectancy. However, with such low current coffee prices, growers will have a shorter life span," Mr. Tu said.

As of October 15, the price of coffee in the Central Highlands fluctuated between 31,600 and 32,400 VND / kg, of which the highest was in Dak Lak and the lowest was in Lam Dong. On the more positive side, Mr. Tu said that the decline in coffee production also contributed to coffee prices when the oversupply pressure decreased. However, Mr. Tu said it is still too early to make a forecast of coffee prices in the 2019-2020 period because Vietnamese coffee prices change according to world coffee prices. Meanwhile, it is mostly forecasted that global economic growth may continue to slow down. This affects demand for coffee, putting pressure on prices.

 

Not only Vietnam but some other countries are also concerned that coffee production in 2019 may decrease due to the impact of bad weather. According to The Indian Express, Coffee growers in Karnataka state (India) are having difficulty due to black rot in coffee affecting the crop, after heavy rains poured down this area in early October. The state's coffee output accounts for 70% of the total production of India. The areas of Kodagu, Chikkamagaluru and Hassan counties have very low coffee and agricultural production after heavy rains. 2019 is the second year that coffee growers, especially small-scale producers, are worried about the increase in fungal diseases and fruit loss affecting crops. It is estimated that last year's rainfall caused damage to 60% of coffee and pepper plants in these districts. 

In Nepal, according to myRepública, although the demand for coffee is high in both domestic and foreign markets, the country's coffee production is on a downward trend. The decline is largely due to migration and the lack of a supportive environment in remote areas.

In the current difficult context, and a new crop has begun, the Chairman of the Vietnam Coffee Association recommends that farmers should not sign future contracts, but instead should sign on-spot contracts in case they have no goods to deliver in the future. Previously, Bloomberg reported that some businesses said that there was difficulty in purchasing coffee because farmers had hoarded goods since the coffee price nearly reached the 9-year bottom. However, Mr. Tu said the amount of goods held by farmers has now been exhausted because they have to sell for capital and repaying the bank.

Strengthen processing

According to Mr. Tu, the increase of export of well-processed coffee has helped the Vietnamese coffee industry to be more stable in the "storm" of prices. Although in 2018, the volume of processed and instant coffee accounted for just over 7%, but the value was very high. Currently, Vietnam has been active in the technology of roasting, sorting, polishing ... Even small coffee shops can buy their own locally produced roaster with a capacity of 5 - 15 kg / batch with attractive price.

"In the future, investing in processing technology will help increase the proportion of processed coffee to 25% of the total coffee output of the country. In the next 10 - 15 years, the value of Vietnam's coffee market will be increased from USD 3.5 billion to USD 6 billion", the representative of Coffee - Cocoa Association forecasted.

According to the data of the Agricultural Product Processing and Market Development Department, there are currently 97 coffee processing companies nationwide with actual capacity of more than 1.2 million tons / year, equivalent to 83.6 % design capacity. For further processing, Vietnam has 160 roasting businesses with a total design capacity of more than 51,600 tons / year; 19 factories producing instant coffee of all kinds with a total capacity of over 170,000 tons / year.

According to Mr. Tu, coffee accounts for a quarter of the world's beverage market with an annual growth of 2%. In particular, the Chinese market has a growth rate of up to 25% / year. Besides, in the domestic market, there are about 26,000 coffee shops. If including the chains of restaurants that sell coffee, the number is 500,000. Therefore, there is still room for development of the industry.

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