Vietnam coffee exporters start to lose footing

TN News

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Vietnamese coffee exporters fear that they could lose the market to foreign companies who have ample money to stockpile the bean.

They say although the business is set to generate a revenue of US$2.6 trillion for Vietnam this year, only foreign exports can claim a successful year.

Le Duc Thong, general director of Dak Lak-based Import-Export Co., one of Vietnam's largest exporters, said this year has seen the dominance of foreign-invested companies. They bought nearly 50 percent of the coffee output in the Central Highlands, Vietnam's coffee growing region.

"The difference is foreign exporters have large capital resources, allowing them to buy a large amount of the bean. So at the end of the crop, they still have enough to supply roasting factories," Thong said.

"Meanwhile, since local firms don't have that much money, they have to immediately export all they can buy in order to repay bank loans as soon as possible," he added.

While foreign companies can access to overseas loans at rates of only 3.5-4 percent a year, Vietnamese exporters have to accept high rates of up to 25 percent, Thong said. This advantage helped foreign firms beat their rivals by offering higher prices to farmers.

Most local exporters have now sold out of stock; some only have several hundred tons left.

Vu Duc Tien, director at Tay Nguyen Coffee Investment, Import and Export Co., the country's biggest coffee exporter, said many people were happy to see foreign companies come and pay higher prices for farmers.

"But there is a risk that at some point, when foreign firms have controlled the market, they will be able to control prices too," Tien said. "Local exporters will then either quit the business or become middlemen."

Deputy Chairman Do Ha Nam of the Vietnam Coffee and Cocoa Association said Vietnam is now a member of the World Trade Organization, so foreign companies have to be allowed to buy materials.

The problem for local exporters is that many international buyers now favor doing business with foreign companies for their reputation and financial strength, Nam said.

"Up to 80 percent of the exports used to come from the 20 largest Vietnamese exporters, but half of the market now belongs to FDI companies. Without immediate measures, the next crop would be even worse for local firms," he said.

Nguyen Cong Hoang, deputy general director of Vinacafe, Vietnam's second-biggest coffee exporter, said losing the market is a result of weak cooperation among domestic companies.

"We have not worked together and that's why we are always at a disadvantage when trading with foreign buyers," he said

In one of the first attempts to regain their market share, Vietnam's 20 leading exporters met last week. They agreed to buy at least 300,000 tons of coffee between November and January 2012 for stockpile. The beans will be kept in stock for six to nine months.

Brazil, Colombia and Vietnam will maintain their dominance of the coffee market, Bloomberg reported last week, citing Supremo SA, a coffee trader in Brugge, Belgium. Brazil is the world's largest producer of the commodity, followed by Vietnam.

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