Exporting Vietnamese Coffee Facing Difficulties

After being introduced to coffee by French missionaries in 1857, it was discovered that Vietnam had the appropriate environment to grow coffee. With government assistance, by the early 1990’s, Vietnam became the world’s second largest coffee producing country. There are two types of coffee being grown in Vietnam, Robusta and Arabica. About 97% of the coffee being produced is Robusta and 3% is Arabica. Vietnam exports coffee to 90 countries worldwide, mostly to the United States and Europe. However, over the past decade, a recent trend in Asia has shown an increased consumption of coffee. As a result, Vietnam has seen an increase of coffee export to Asia from 10% to 24% in 2016.

Due to various internal and external factors, Vietnam’s coffee exports have been on a decline since the beginning of 2019. Between January and April, 629,000 tonnes of coffee worth 1.1 billion USD was exported. A decrease by 13.4% in volume and 22.5% decrease in value, compared to last year. Both domestic and global coffee prices are continuing to decline. Domestic coffee price dropped to the lowest its ever been in the past decade at 1.28 USD per kg. While the international price of coffee also declined from 1,795 USD per tonne to 1,295 USD per tonne at the beginning of May.

Recently Vietnam has been struggling with exports to the United States, Germany, India, Algeria, France, Japan, and the Republic of Korea due to competition from rivaling coffee producing countries like Colombia and Brazil. Nguyen Xuan Cuong, the Minister of Agriculture and Rural Development suggested that it is due to the limited quality of Vietnamese coffee, lack of diverse products, and inactive response to market fluctuations. He also mentioned that the coffee sector should apply technology to production in order to combat droughts and help maintain the quality of the coffee.

The Chairman of Vinh Hiep Co. Ltd (a coffee processor and exporter), Thai Nhu Hiep said that specialty products only contribute 2% of global exports, but they add five to ten times the value of coffee. With Vietnam entering new trade agreements, businesses will get the benefits of tariff cuts, opening more opportunities to bounce back and maintain competitiveness as the world’s second largest coffee producing country.

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