Hundreds of thousands of coffee trees in Vietnam are too old and a failure to replace them with new ones will cause coffee output and the country’s exports to shrink in the next few years.
But farmers are not keen despite the government’s credit support because the down time is too long, according to Nguyen Xuan Thai, head of Thang Loi company, which is involved in coffee plantation, production and export, said.
“Many coffee growers are not interested in replacing old trees because they still earn profits from the old trees. The replacement takes long and involves high costs for interest.”
Most of the coffee trees on three hectares of land owned by Nguyen Van Thang in Dac Lac Province were planted 30-35 years ago, and need to be replaced with new ones because of lower output and quality in recent years, but he has not done it.
“There are too many issues in replanting them. Capital for replanting is not the most important issue; it is the decrease in earnings for five or six years when the new trees are too young to bear fruit,” Thang said.
The cost of replanting the three hectares is estimated at some VND450 million ($20,454). It is not a very big amount, and can easily be raised from savings and loans from family, friends or banks.
“The big issue is how will we live during the time our trees are young and not fruiting,” he said.
Thang is not the only coffee farmer to think in this manner, and this has, for many years, prevented the replacement of coffee trees in the world's largest producer of robusta despite the government’s efforts.
The central bank has assigned the Agriculture Bank of Vietnam to provide soft loans worth VND10 trillion by 2020 for coffee replanting as part of a drive to replace old trees to boost national output.
Farmers in the five Central Highlands provinces where coffee is grown can get up to VND150 million per hectare for eight years to replace old, low-yielding trees, the State Bank of Vietnam said in a recent statement.
The loan carries a maximum interest rate of 7 percent, compared with 9-10 percent for other medium- and long-term dong loans.
There are concerns this scheme will fail since farmers are not interested in the loans. Agribank planned to offer loans of VND3 trillion in Dac Lac, the country's largest coffee-growing province, between 2013 and 2016. Farmers could borrow VND150-200 million per hectare for up to seven years.
However, only VND110 billion has been lent in one year due to limited demand.
Le Ngoc Bau, head of the Central Highlands Agriculture and Forestry Science Institute, said: “The cost of replacing old plants is not too much for coffee producers who have made sizable profits from exports for the past many years. So it is not the main reason for the slow replacement of old trees.”
The problem is that farmers do not have enough information about the technologies required and new coffee varieties, he said. They plant seeds and saplings with low resistance to pests, meaning the number of dead plants in the first one or two years after planting is often high, he explained.
The government should increase assistance to coffee growers in terms of technology for replanting of coffee trees, he said, pointing out the support is still limited. Most farmers regrow the trees on their own and do not use advanced technologies, he added.
Impact on exports
Luong Van Tu, the chairman of the Vietnam Coffee and Cocoa Association, warned that the proportion of aged coffee trees is increasing rapidly. Without replanting its trees, Vietnam would be relegated in the world coffee export market in the next few years, he said.
The country is now the world’s second biggest coffee exporter, accounting for more than 20 by volume though only 3 percent in terms of value because of low prices.
The country, in recent years, has had to import coffee seeds from Laos and Indonesia to process for export since local supply is not enough to meet export demand.
One of the reasons for the situation is the lower output of aged trees, Tu said.
Vietnam should accelerate replanting of coffee trees, he said, citing the case of Colombia and Indonesia, which started replanting after 50-60 years. The en masse recultivation has sharply cut their output, affecting their economy and farmers.
Bau said the slow pace of recultivation in Vietnam has not yet seriously affected exports, but output would fall sharply in the next 10 years if replanting is not speeded up on large areas.
Vietnam shipped 577,000 tons of coffee worth nearly $1.2 billion in the first five months of this year, down 39.6 percent in volume and 31.8 percent in value from the same period last year, according to the General Statistics Office.
“It is necessary to frequently replace old trees with new ones,” Bau said.
“However, it is a big task in Vietnam since we need to replace tens of thousands of hectares of coffee trees every year. Years ago we grew coffee trees en masse on tens of thousands of hectares annually.”
Vietnam has over 640,000 hectares under coffee, according to the Ministry of Agriculture and Rural Development, with more than 30 percent having old trees, or those producing for at least 20 years.
The output in the 2013-14 season was 1.68 million tons.