Vietnam Coffee Growers Continue to Hoard Crops
HCMC – Hoarding by growers and sliding future prices have driven up Vietnam’s monthly coffee inventories to over three times higher than the previous year. The country is currently the world’s leading exporter of robusta coffee, earning US$3.62 billion from coffee exports in 2014. Vietnam now rivals Brazil in coffee production.
As of the end of August, according to a survey by Bloomberg, it is estimated that Vietnam’s coffee farmers were holding back 320,000 metric tons (~20 percent of the current harvest) – a five-year high. In 2013, growers only held back five percent (90,000 tons) of their crop. Exports are at their lowest levels since 2010, down 30 percent this year as of August. Robusta futures are down 17 percent so far this year (September 8th saw robusta on ICE Futures Europe close at US$1,592 a ton ).
Despite three recent devaluations of the country’s currency, the dong, the price of robusta futures has barely budged, and the prices on offer to farmers continue to remain low. Therefore, the current situation regarding supply does not look set to change in the near future.
The current situation of coffee prices will not be helped by the fact that Brazil and Indonesia (the other two key coffee producing countries) are suffering severe currency problems, which has forced them to push up their export levels. As supply increases on the market, Vietnam’s farmers will see little reason to release their stocks in the face of falling prices.
Vietnam has become a key producer of coffee beans due to its favorable climate conditions, lower cost production and recent bumper coffee crops. In recent years, coffee has become one of Vietnam’s key agricultural export products – with 95 percent of output being shipped abroad. Per year, on average, coffee exports from Vietnam bring in around US$3 billion in revenue to the country. According to a survey conducted by Bloomberg, Vietnam’s next harvest has been forecast to amount to 1.72 million tons, slightly higher than the current crop. Germany and the United States are the largest importers of Vietnamese coffee.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Import and Export: A Guide to Trade in Vietnam
In this issue of Vietnam Briefing Magazine, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations.
Using Vietnam’s Free Trade & Double Tax Agreements
In this issue of Vietnam Briefing we explore how Vietnam’s Free Trade Agreements – and especially those via its membership in ASEAN – will affect foreign investment into Vietnam. We also go a step further and examine the specific, bilateral Double Tax Agreements that Vietnam has enacted, and how these can be further used to minimize profits and withholding taxes that would otherwise be levied upon foreign investors.
Developing Your Sourcing Strategy for Vietnam In this issue of Vietnam Briefing Magazine, we outline the various sourcing models available for foreign investors – representative offices, service companies and trading companies – and discuss how to decide which structure best suits the sourcing needs of your business.