Minimize risks when coffee prices increase abnormally
Coffee prices increased 3 times, many contracts were broken. Supply is only 300.000 tons, coffee price is approaching 120.000 VND/kg |
“In the 2023-2024 coffee season and especially 2024, coffee prices have reached the highest level of all years” – Mr. Nguyen Hai Nam, Chairman of the Vietnam Coffee and Cocoa Association (VICOFA) shared and said that in the first quarter of 1, Vietnam’s total coffee export output will reach about 2024 tons with a turnover of 600.000 billion USD. This is also the highest level in recent years and this increase is due to coffee prices.
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Mr. Nguyen Nam Hai – Chairman of VICOFA |
Mr. Nguyen Nam Hai commented: There are many reasons why coffee prices increase. First, In the recent 2022-2023 crop year, inventory reached its lowest level in many crop years. The 10-2023 crop will start in October, but since June and July we have been short of goods, with no goods delivered to pre-sold export contracts.
Monday, Due to the effects of climate change, especially the dry El Nino phenomenon, it affects the productivity and output of global coffee, especially robusta coffee, which needs water.
Tuesday, due to war and embargo, affecting global coffee consumption, causing coffee prices to rise.
Wednesday, On coffee floors, financial investors also focus on coffee products, second only to oil products, which is also one of the factors that have increased coffee prices in recent times.
In fact, from VICOFA’s statistics, it shows that in March 3, the new domestic coffee price was 2023 VND/kg, but by October 47.000, the price was over 10 VND/kg, and up to the present time Coffee price is at 2023 VND/kg. The rapid increase in prices is associated with high risks for businesses purchasing goods for export through agents and traders. Some purchasing agents and businesses in localities with raw materials did not deliver goods on time as stipulated in the purchase and sale contracts for export processing enterprises and FDI enterprises even though the parties had discussed the division. share risks, causing great damage to buyers and discrediting the Vietnamese coffee industry.
At the current price level, although farmers benefit, businesses are facing difficulties because when coffee prices increase too much, there is a phenomenon of supply chain disruption. Farmers do not sell to exporters but sell to agents and traders, leading to supply chain disruption.
According to Mr. Nguyen Nam Hai, in Vietnam’s coffee supply chain, farmers do not sell directly to exporters but through a system of agents and traders. When coffee prices increased, a breakdown occurred at the traders’ level. Therefore, Mr. Hai said he has warned businesses, especially intermediary businesses such as agents and traders, to ensure reputation for Vietnamese exporters as well as foreign businesses. On the exporter side, Mr. Nguyen Nam Hai noted that they should minimize long-distance selling and especially long-distance buying to avoid the risk of having to buy high-priced goods for low-priced contracts or not being able to perform the contract.
For sales contract disputes that have occurred, it is recommended that buyers and sellers negotiate and agree to share risks, prices as well as progress and delivery time when coffee prices increase. suddenly high, avoid cumulative damage to one side.
In particular, on behalf of VICOFA, Mr. Hai suggested that the bank should increase loan limits and prioritize interest rates for coffee import-export businesses. Localities in raw material areas need to propagate and warn farmers, local agents and traders to minimize the practice of “buying far, selling far” to avoid high risks when prices increase. Localities also need to warn about expanding coffee growing areas when prices rise, to prevent a subsequent coffee surplus crisis.
In the long term, Mr. Hai affirmed: Vietnam needs to develop sustainable coffee. Because climate change is the first factor affecting the coffee industry. Over the past many years, not only Vietnam but all coffee growing regions globally, especially robusta coffee growing regions, have been greatly affected by climate change. This is also the most important factor affecting coffee productivity and output in the past crop year. The current problem is to ensure sustainability for the coffee industry from production to processing and export. In particular, it is necessary to create relationships between businesses and farmers to build quality coffee areas for sustainable development.