Coffee prices have risen, but so have the costs of fertilizers, fuel, and labor, making coffee production and trading still challenging. Mr. Van Thanh Huy, Chairman of the Vietnam Coffee and Cocoa Association, believes that coffee must participate in the global trading market to take advantage of risk-management tools when prices fluctuate unpredictably.
Coffee is highly price-sensitive. Prices have swung from USD 900 per ton to USD 1,200–1,500 per ton. In 1994, prices reached nearly USD 4,000 per ton, while in 2001–2002, they plummeted disastrously to USD 500 per ton, at times falling to USD 380–420 per ton FOB. Currently, prices have only slightly rebounded to USD 600–650 per ton.
At present, Vietnamese coffee is sold only in the physical market, whereas the world already has a coffee futures market with financial instruments such as futures contracts, call options, and put options to limit risks.
Mr. Huy emphasizes the importance of put and call options: when prices reach an ideal high but it is not yet harvest time, producers can sell ahead of the harvest, locking in prices for future delivery.
If this situation continues without change, coffee exporters—and consequently coffee producers—will face significant disadvantages.
Vietnam’s Potential to Join the Global Coffee Market
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Mr. Huy strongly hopes that Vietnamese coffee will soon join the international coffee trading market, as it is closely tied to exporters’ rights and obligations. Vietnamese coffee is already in the process of international integration and cannot afford to miss this opportunity.
The government, therefore, needs to create a legal framework aligned with international practices. In terms of capacity, if knowledge is lacking, Vietnam must focus on training and education to build expertise.
The Challenge of Coffee Quality
Some argue that to join the global coffee market, quality must be improved. Coffee quality involves not only farmers and exporters, but also scientists, technology experts, and all sectors related to harvesting, processing, and exporting.
Calls for high-quality products will be meaningless if farmers lack the resources to build drying yards or invest in post-harvest processing equipment, or if issues like theft prevention during ripening are not addressed.
To meet international standards and increase value, the impurity rate of exported coffee must be reduced. Currently, Vietnam’s exported coffee often contains around 1% impurities.
During customer meetings (including both buyers and sellers), Mr. Huy learned that if exported coffee contains 1% impurities, then for a container of 330 bags of coffee shipped to Europe, there will be 3 bags of impurities.
With 900,000 tons of coffee exported in 2003–2004, this amounts to 9,000 tons of impurities—which not only increases transportation costs, but also damages Vietnam’s reputation for coffee quality.
Can Vietnam Produce High-Quality Coffee?
Mr. Huy affirms that Vietnam can produce high-quality coffee. With proper processing technology, the impurity rate can be reduced to 0.5% or even 0.3%.
Lowering impurities means reducing unnecessary transport costs from Vietnam to Europe. Buyers are always willing to pay for high-quality products, and sellers are ready to meet these standards.
Vietnamese coffee has already entered the high-quality market, though the volume is still small.
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The price difference between high-quality coffee and regular coffee is about USD 50–70 per ton.
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R2 and R1 coffee (clean, without impurities) fetch USD 40–50 per ton more than standard R2 coffee.
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R1 polished to 0.1% impurities can sell for USD 100–120 per ton more.
Key Steps to Improve Quality and Market Participation
To improve coffee quality and effectively participate in the global trading market, Mr. Huy highlights the need for:
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Drying Facilities: Farmers must have cement drying yards immediately after harvest to ensure proper technical processing. Where drying yards are unavailable, mechanical dryers are essential, especially in remote areas where coffee cultivation is expanding.
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Financial Support: Assistance should not be handouts, but a system allowing farmers to borrow money at preferential interest rates with deferred repayment.
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Processing Technology: Greater investment in high-quality coffee processing technology to meet the standards of international markets.