2011 Coffee Annual

An Expert's View about Beverages in Vietnam

Last updated: 19 Oct 2012

Post estimates that coffee production in MY2010/11 will reach 18.7 million 60 kg-bags, or 1.12 million metric tons (MMT) of coffee beans.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 5/25/2011 GAIN Report Number: VN1038 Vietnam Coffee Annual 2011 Coffee Annual Approved By: Roy J. Taylor Prepared By: Nguyen Thi Huong, Tran Quoc Quan Report Highlights: Post estimates that coffee production in MY2010/11 will reach 18.7 million 60 kg-bags, or 1.12 million metric tons (MMT) of coffee beans. Vietnam?s coffee production for MY 2011/2012 is estimated at 20.6 million 60 kg-bags or 1.24 MMT of coffee beans, about a 10 percent increase over the previous year due to high yields and improved investment in production. Current high prices will motivate coffee growers and local traders to export most of their beans; therefore, Post expects that carry-in stock levels for MY 2011/2012 will be only 1.2 million bags, or 72 thousand metric tons (TMT) of green bean equivalent (GBE). Commodities: Coffee, Green   Production: Marketing Year (MY) 2010/11 (Oct-Sep) Post estimates that coffee production in MY 2010/11 will reach 18.7 million 60 kg-bags, or 1.12 million metric tons (MMT) of coffee beans. This is a seven percent increase over the previous marketing year, due to favorable weather in Vietnam?s main coffee growing areas and additional output from young coffee trees in new and replanted production areas. Marketing Year (MY) 2011/12 (Oct-Sep) Post?s forecast for MY 2011/2012 coffee production is 20.57 million 60 kg-bags or 1.23 MMT, about a 10 percent increase over MY 2010/11. Recent favorable weather conditions and the current high market price for coffee have bolstered farmer?s incomes and given them the confidence to make greater investments in their next crop. According to local traders, high prices and an expectation of better yields motivated coffee growers to begin irrigating their fields in late February, during the flower blooming period. In recent years, coffee farmers have improved the precision of field irrigation and fertilizer application, producing less waste and enhancing yields. The rainy season arrived on time in the Central highlands and the fruit setting period has gone well, yields should be good if the weather in June and July remains favorable. According to Vicofa (Vietnam Coffee & Cocoa Association), Vietnam has about 137,000 ha of old and low-quality coffee trees that need to be replaced, accounting for more than 25 percent of total area. The Government of Vietnam (GVN) is encouraging farmers to replace old and low-quality coffee trees, especially in the provinces of Dak Lak and Lam Dong. The GVN hopes that the current high prices and increased farm income levels will encourage investment in both newly planted and grafted trees. Exporters and local coffee experts expect that a large area of old and low-quality coffee trees will be replanted in the near future. This could temporarily reduce production by up to 20 percent. On the other hand, ideal weather and improved inputs should increase production up to 30 percent. Post predicts that the increase will offset the drop in production from replanting and will make the overall increase in total production of MY2011/12 at least 10 percent. According to the Ministry of Agriculture and Rural Development (MARD), Arabica coffee accounts for 3 percent of the total coffee production in Vietnam; the other 97 percent is Robusta. Although the production area for Arabica is slowly expanding in the Northern and Central regions in Vietnam, Post still does not expect Arabica production to surpass the 3 percent threshold in the next five years. Table 1: Coffee Production by Marketing Year (Oct.-Sept.) 2009/2010 2010/2011 2011/2012 forecast Marketing year begins 10/2009 10/2010 10/2011 Production (green bean, thousand 1,050 1,124 1,236 tons) Average coffee yield (ton/ha) 2.09 2.1 2.2 Source: Post estimates Consumption: According to local coffee producers, Vietnam?s domestic consumption has grown significantly in recent years. Post has revised its estimates for domestic consumption in MY 2010/11 to 1.5 million 60 kg bags, or 90 thousand metric tons (TMT) green bean equivalent (GBE), about 20 percent higher than the previous year. Domestic consumption utilizes about 8 percent of total production. Vietnam?s current per capita coffee consumption, while increasing, is only about 0.97 kg/person, still considerably lower than other producing and importing countries (see Table 2). Table 2: Per Capita Coffee Consumption of Selected Countries Country Per capita coffee Per capita coffee *Per capita coffee consumption in consumption in consumption in 2008 (kg/capita) 2009 (kg/capita) 2010 (kg/capita) Coffee Exporting Countries Vietnam 0.70 0.82 0.97 Brazil 5.48 5.64 n/a Honduras 3.77 3.77 n/a Venezuela 3.41 3.52 n/a Costa Rica 3.54 3.17 n/a Nicaragua 2.01 2.22 n/a Coffee Importing Countries Norway 8.99 8.92 n/a Switzerland 9.14 7.65 n/a Canada 5.79 5.94 n/a EU 4.82 4.67 n/a USA 4.17 4.09 n/a Japan 3.33 3.36 n/a Source: International Coffee Organization; Post estimates Domestic marketers began courting domestic consumers by selling a range of roasted, ground, and instant coffee products in wholesale supermarkets, retail supermarkets, and convenience shops. Stylish coffee chains have opened all over the country; popular cafes include Trung Nguyen Café, Highlands Coffee, and Gloria Jean?s. As more middle-class consumers respond to the coffee industry?s effective marketing efforts, coffee consumption at home continues to increase. Young consumers in major cities are the fastest growing market segment. Some coffee producers and marketers believe that domestic consumption could reach 100 TMT-GBE in the current marketing year. However, no official data exists for Vietnam?s domestic coffee consumption, and no reasonable survey or market research is available. Trade: Exports: According to trade data from the General Customs Office, Vietnam exported 10.02 million 60kg-bags or 601 TMT-GBE in the first six months of MY 2010/11 (Oct.? Mar.), a 17 percent increase over the same period of MY 2009/10 (see Table 3). The export value in the first half of the MY 2010/11 reached a record of $1.2 billion, an increase of 65 percent over the same period of the previous marketing year thanks to near record global prices. Table 3: Vietnam?s Green Coffee Exports, MY 2008/09 ? MY 2010/11 % Change Month 2008/2009 2009/2010 2010/2011* MY2010/11 over MY 2009/10 Volume Value Volume Value Volume Value (TMT) ($ million) (TMT) ($ million) (TMT) ($ million) Volume Value Oct. 34 60 52 74 49 85 -6% 15% Nov. 63 106 70 100 62 109 -11% 9% Dec. 159 262 114 160 113 203 0% 27% Jan. 118 182 112 158 136 267 21% 69% Feb. 119 181 64 92 94 197 47% 114% Mar. 110 158 104 142 147 333 41% 135% Sub-total 603 949 516 726 601 1,194 16% 64% April 103 149 102 137 May 69 100 78 111 June 64 93 79 114 July 44 63 81 124 Aug. 49 70 69 110 Sept. 45 65 65 106 Grand Total 977 1,489 989 1,426 Source: Global Trade Atlas; *Vicofa and General Customs Office In the first six months of MY 2010/11, Vietnam exported coffee beans to almost 75 countries worldwide. The top fifteen markets accounted for about 84 percent of total Vietnamese coffee bean exports. The United States became the largest importer of Vietnamese green coffee beans (see Table 4 & Table 5). Vietnam?s coffee bean exports to Belgium, Italy, Netherlands, Singapore, and France grew significantly in the first half of MY 2010/11 compared with the same period of the previous marketing year (see Table 4). Table 4: Key Markets for Vietnamese Green Coffee Exports, first half of MY 2009/2010 and MY 2010/2011 MY 2009/2010 MY 2010/2011 % Change (Oct.2009- (Oct.2010- MY2010/11 over Export Rank Mar.2010) Mar.2011) MY 2009/10 Destinations Vol. Value Vol. Value Vol. Value (TMT) ($000) (TMT) ($000) (TMT) ($000) 74 116,455 97 208,803 31% 79% 1 United States of America 81 116,008 74 151,440 -9% 31% 2 Germany 25 34,428 74 143,267 196% 316% 3 Belgium 34 47,265 57 109,283 68% 131% 4 Italy 34 46,077 42 81,150 24% 76% 5 Spain 9 12,938 25 48,803 178% 277% 6 Netherlands 25 38,935 22 51,133 -12% 31% 7 Japan 20% 56% 8 South Korea 15 20,977 18 32,699 4,254 30,472 433% 616% 9 Singapore 3 16 18 23,245 15 30,475 -17% 31% 10 Switzerland 24,640 30,955 -21% 26% 11 United Kingdom 19 15 15 19,620 14 25,925 -7% 32% 12 Russia 9 12,496 13 23,968 44% 92% 13 China 16,899 24,643 8% 46% 14 Algeria 12 13 7 9,633 12 22,395 71% 132% 15 France -30% -2% 16 Others 135 181,531 94 178,772 Total 515 725,401 601 1,194,183 17% 65% Source: Vicofa; General Customs Office Table 5: U.S. Coffee Imports from Vietnam MY 2009 MY 2010 MY 2011 (Oct-. 08-Sept. 09) (Oct. 09-Sept. 10) (Oct.10-Mar. 11) Value Value Value Product Qty (MT) Qty (MT) Qty (MT) ('000 $) ('000 $) ('000 $) Coffee, Not Roasted (HS code 090111) 238,310 153,782 319,936 211,377 198,875 97,301 Coffee, Not roasted Def (HS code 090112) 4,774 2,899 7,070 3,940 7,397 2,801 Coffee, Roasted (HS code-090121) 2,283 511 2,033 644 1,001 282.6 Coffee, Roasted, Def (HS code 090122) 635 166 1,130 394 3,659 1,242 Coffee Husks and skins (HS code 090190) 11 4.6 7 1.7 6 1.5 Coffee Extracts, Instant coffee (HS code 2101) 4,093 1,245 4,283 1,378 3,306 1,018 Source: Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics According to Vietnam?s General Statistics Office, Vietnam exported 940 TMT of coffee of all types, valued at $1.9 billion, in first seven months of MY 2010/11. This was a 27 percent increase in volume and 84 percent increase in value over the same period of the previous market year (see Table 6). Table 6: Vietnam?s Coffee Product Exports (All Types), MY 2008/09 ? MY 2010/11 % Change 2008/2009 2009/2010 2010/2011 Month MY2010/11 over (Begin: Oct. 2008) (Begin: Oct. 2009) (Begin: Oct. 2010) MY 2009/10 Volume Value Volume Value Volume Value (TMT) ($ million) (TMT) ($ million) (TMT) ($ million) Volume Value Oct. 39 71 55 79 57 97 4% 23% Nov. 71 121 82 115 69 120 -16% 4% Dec. 130 221 145 202 164 292 13% 45% Jan. 136 210 141 198 215 414 52% 109% Feb. 153 234 77 110 144 303 87% 175% Mar. 136 199 123 168 161 365 31% 117% April 124 180 117 159 130 307 11% 93% Sub-total 789 1,236 740 1,031 940 1,898 27% 84% May 92 132 100 141 June 78 115 95 137 July 53 76 89 138 Aug. 54 77 78 123 Sep. 48 71 58 93 Grand Total 1,114 1,707 1,160 1,663 Source: General Statistics Office According to GVN trade data, in the first half of MY2010/11, Vietnam exported ground, roasted and soluble coffee products with a value of over $84 million. Vicofa believes that Vietnam should invest in the production of more value-added coffee products, such as instant coffee, to fulfill growing demand in China and in the Association of Southeast Asia Nations (ASEAN). Imports: Vietnam continues to import small quantities of green coffee, as well as roasted and instant coffees. According to trade data from Vicofa and the General Customs Office, total green bean coffee imports for the first half of MY2010/11 were 125 thousand 60-kg bags, or 7.5 TMT-GBE, a 286 percent increase over the same period of the previous marketing year. The total value reached $21 million. Eighty-seven percent of the imported beans were Arabica, mainly from Laos and Indonesia. According to the Global Trade Atlas, Vietnam imported small quantities of roasted and instant coffee products during the first six months of MY2010/11with total values of $358 thousand and $10 million, respectively. Instant coffee products were sourced mainly from Thailand, Indonesia, and Malaysia. PRICES Export: The average export price of Vietnam?s Robusta coffee beans for the first seven months of MY 2010/11 was $1,964/MT (FOB Ho Chi Minh City basis), which is a 55 percent increase over the same period of the previous marketing year ($1,271/MT) (see Table 7, Graph 1). The increase in price can be attributed to low world stocks, growing global demand, and uncertain weather in some coffee exporting countries. On May 4, 2011, $2,570/MT FOB Ho Chi Minh City basis was quoted for ungraded Robusta green beans, according to Vicofa. This is the highest price quoted in the past sixteen years (see Graph 2), but it is still lower than the record price of $2,658 in MY 1994/95. Table 7: Average Export Prices for Vietnamese Green Coffee, MY2009/10 - MY2010/11 FOB Oct. Nov. Dec. Jan. Feb. Mar. Apr. Average (Ho Chi Minh City) price for common for ungraded coffee 7 months beans (US$/MT) MY2009/10 $1,357 $1,278 $1,277 $1,297 $1,218 $1,198 $1,271 $1,271 *MY2010/11 $1,552 $1,806 $1,821 $1,910 $2,093 $2,281 $2,283 $1,964 % change MY2010/11 over MY2009/10 14% 41% 43% 47% 72% 90% 80% 55% Source: Dak Lak Trade, Investment & Tourism Promotion Center (Daktip);*Vicofa Graph 1: Average Export Prices for Vietnamese Green Coffee, MY2009/10 ? MY 2010/11 Source: Dak Lak Trade, Investment & Tourism Promotion Center (Daktip);Vicofa Graph 2: Average Export Prices for Vietnamese Green Coffee, MY1990/91 ? MY 2010/11 Source: Dak Lak Trade, Investment & Tourism Promotion Center (Daktip); Vicofa Domestic: Vietnam?s average domestic coffee price for Robusta common ungraded coffee beans in the first seven months of MY 2010/11 in Dak Lak province, the largest coffee growing area in Vietnam, was VND 39,111/kg ($1.89), an increase of 63 percent over the same period of the previous marketing year in line with the increase of coffee prices in the global market (see Table 8, Table 9). The price of VND 50,000 ($2.40) was recently quoted for common ungraded Robusta coffee beans in Dak Lak province. Coffee growers hope they will be able to sell their coffee beans at these prices during the second half of the current marketing year. Table 8: Average prices for Robusta Beans in Major Coffee Growing Provinces in MY2010/2011 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Average price, Common coffee 2010 2010 2010 2011 2011 2011 2011 first 7 months beans of (VND/kg) MY2010/11 Dak Lak Province 30,210 34,190 35,390 37,730 42,630 46,410 47,220 39,111 Lam Dong Province 30,210 34,200 35,380 37,720 42,440 46,270 47,12 0 37,703 Gia Lai Province 30,130 34,050 35,260 37,690 42,440 46,330 47,20 0 37,650 Dak Nong Province 30,130 34,080 35,310 37,780 42,770 46,460 47,280 39,116 Source: Vicofa Exchange rate as of May 11, 2011: US$1 = VND 20,698 (Source: State Bank of Vietnam) Table 9: Average Prices for Robusta Beans in Dak Lak Province (MY 2008/2009-2010/2011) Common Coffee Bean Month Changes MY 08/09 MY 09/10 MY 10/11* MY 10/11 over (VND) (VND) (VND) MY 09/10 (%) October 23,400 24,400 30,210 24% November 25,700 24,100 34,190 42% December 24,800 24,200 35,390 46% January 25,300 24,000 37,730 57% February 25,200 23,200 42,630 84% March 24,200 23,300 46,410 99% April 24,800 24,300 47,220 94% Average price for 7 months in MY2010/11 24,771 23,929 39,111 63% May 25,000 24,300 June 24,100 26,000 July 24,400 29,400 August 24,500 29,300 September 24,900 29,200 Source: Dak Lak Trade, Investment & Tourism Promotion Center (Daktip); *Vicofa Stocks: No official data for coffee stocks are available. According to local coffee growers/traders, processors and traders are currently holding about 300-350 TMT of coffee beans. Due to high prices, coffee growers have been selling almost all of their coffee beans and are currently holding small stocks at their houses. According to local traders, Vicofa?s proposed stockpiling program for 5 million 60 kg- bags or 300 TMT-GBE for MY2010/11 has not yet been approved by the GVN. Post?s estimate for MY 2011/12 coffee carry-in stocks is 1.7 million 60kg-bags, or 100 TMT-GBE, a 39 percent increase over the previous marketing year. Policy: Vietnam opens first commodities exchange In January 2011, Vietnam opened its first commodities exchange, Vietnam Commodity Exchange (VNX), in Ho Chi Minh City. VNX will operate as a joint-stock company with an initial charter capital of VND150 billion (US $7.5 million). The Ministry of Industry and Trade has licensed VNX to trade all commodities; however, in 2011 the company will focus on coffee, rubber, and steel. VNX?s operational mechanisms are modeled on other commodity exchanges around the world. Its customers can trade both spot contracts and futures contracts. The company offers investor services linked to commodity futures contracts and options for commodity swaps, as well as brokerage, goods evaluation, transactions, investment consulting, risk management, derivatives, and financial support. VNX plans to open another trading center in Hanoi in the next two years. INDUSTRY ACTIVITIES Buon Ma Thuot Coffee Exchange Centre launches futures trading In March 2011, the Buon Ma Thuot Coffee Exchange Center (BCEC) launched futures trading as part of its business. Each futures contract is two metric tons of green bean coffee. The contracts are priced in VND and are traded from 2pm to 5pm every day. Traders can confirm their positions (loss, gain) through BCEC?s daily report. The goal of this exchange is to help both producers and marketers hedge their risk. The Dak Lak People?s Committee supports BCEC through trade promotion and by attracting new investors and customers. Production, Supply and Demand Data Statistics : Table 10: Vietnam?s Coffee Production, Supply and Demand (PSD) Coffee, Green Vietnam 2009/2010 2010/2011 2011/2012 Market Year Begin: Oct Market Year Begin: Oct Market Year Begin: Oct 1000 HA, MILLION 2009 2010 2011 TREES, 1000 60 KG USDA USDA USDA New Post New Post New Post BAGS Official Official Official Area Planted 536 0 0 0 0 Area Harvested 504 0 0 0 0 Bearing Trees 629 0 0 0 0 Non-Bearing Trees 80 0 0 0 0 Total Tree Population 709 0 0 0 0 Beginning Stocks 2,308 2,308 1,784 1,285 1,194 Arabica Production 450 450 475 583 667 Robusta Production 18,300 18,050 18,250 18,150 19,933 Other Production 0 0 0 0 0 Total Production 18,750 18,500 18,725 18,733 20,600 Bean Imports 75 51 80 80 133 Roast & Ground 1 1 1 1 1 Imports Soluble Imports 25 25 25 25 25 Total Imports 101 77 106 106 159 Total Supply 21,159 20,885 20,615 20,124 21,953 Bean Exports 18,190 18,190 17,200 17,200 18,500 Rst - Grnd Exp. 25 50 50 50 50 Soluble Exports 160 160 180 180 200 Total Exports 18,375 18,400 17,430 17,430 18,750 Rst., Ground Dom. 900 1,080 950 1,320 1,343 Consum Soluble Dom. Cons. 100 120 100 180 190 Domestic Use 1,000 1,200 1,050 1,500 1,533 Ending Stocks 1,784 1,285 2,135 1,194 1,670 Total Distribution 21,159 20,885 20,615 20,124 21,953 Source: USDA/FAS Statistical Tables: Table 11: Vietnam?s Coffee Export Trade Matrix for MY208/2009-MY2009/2010 (Oct.-Mar.) Country Vietnam Commodity Coffee, Green Time Period Oct.- Mar. Units: MT Exports for: 2010 2011 U.S. 74,297U.S. 96,547 Others Others Germany 80,863Germany 74,411 Italy 34,182Belgium 74,338 Spain 33,851Italy 56,692 Japan 25,148Spain 42,122 Belgium 24,913Netherlands 24,722 Indonesia 18,860Japan 22,339 United Kingdom 18,812South Korea 18,364 Switzerland 17,536Singapore 16,054 South Korea 15,181Switzerland 15,245 Russia 14,816United Kingdom 15,197 Total for Others 284,162 359,484 Others not Listed 156,652 145,855 Grand Total 515,111 601,886 Sources: Vicofa, General Customs Office Table 12: Green Coffee Import Trade Matrix for MY2009/2010-MY2010/2011 (Oct.-Mar.) Country Vietnam Commodity Coffee, Green Time Period Oct.-Mar. Units: MT Imports for: 2010 2011 U.S. 0U.S. 0 Others Others Indonesia 651Laos 5,292 Laos 495Indonesia 1,541 Total for Others 1,146 6,833 Others not Listed 787 627 Grand Total 1,933 7,460 Sources: Vicofa; General Customs Office; General Statistics Office                    
Posted: 11 July 2011, last updated 19 October 2012

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