Vietnam put out 1 million tons of coffee in the 2010-2011 crop. However, more than 50 percent of the output was purchased by foreigners. The foreign businessmen have nearly controlled the domestic coffee price.
Especially, they took the actions to tarnish the good repute of Vietnamese enterprises, thus persuading international importers to shift to do business with them.
Domestic market controlled by foreigners
A report released by the Vietnam Cocoa and Coffee Association (Vicofa) showed that two years ago, the volume of coffee material collected by foreign businessmen on the domestic market only accounted for 15 percent of the total output. Meanwhile, the figure has risen to 50-60 percent.
Some 20 foreign coffee trade companies have been present in Vietnam, including the big names. This has made the competition in the domestic market get stiffer. In the past, Vietnamese coffee companies always had 100,000 tons in stock which were carried forward from the previous to the next crop. Meanwhile, they had no inventory volume in the 2010-2011 crop. However, foreign businessmen still had 350,000 tons in stock.
Do Ha Nam, Deputy Chair of Vicofa, said that Vietnamese companies are losing in the game in the home market. Vicofa earlier asked the Government to give support to help domestic enterprises to store coffee materials. However, as the proposal was refused, domestic enterprises had no other choice than sitting idle and letting foreign companies collect all materials.
Foreign companies once had to rely on domestic companies to collect materials. However, they now can bully domestic enterprises. The problem is that foreign companies now can collect coffee materials directly from farmers, no need to go through domestic intermediaries.
Commercial banks have agreed to provide loans
Vicofa said that domestic enterprises need to collect 300-400,000 tons ofmaterials in order to be capable to regulate the market. Meanwhile, the volume of just tens of thousands of tons would make nothing.
Chair of Vicofa, Luong Van Tu, has informed that Vicofa has reached agreements with Agribank and Military Bank on providing loans to coffeeenterprises. Both of them have agreed to provide the loans big enough to helpcoffee companies to store at least 300,000 tons of coffee in the next crop. It is estimated that 15 trillion dong worth of capital would be disbursed, of which 5 trillion dong would fund the export contracts, while 10 trillion dong would help collect and store materials. The reasonable time for collecting and storingmaterials would be from November 2011 to January 2012.
The information about the loans has made domestic coffee companies excited. Vicofa believes that with the support of the banks, domestic companies will be able to compete with foreigners in the next crop, to commence from November 2011.
To date, 16 Vietnamese enterprises have registered to collect coffee materialswith the volume of up to 425,000 tons.
Nam has affirmed that with the capital sources, domestic enterprises will be in no way inferior to foreign ones.
In general, the prices of coffee materials have low prices at the beginning of the crop. Farmers try to bargain away coffee for fear that the prices may go down further. Therefore, foreign companies always try to collect materials at that moment, when the prices are still low. Meanwhile, domestic companies do not have capital to collect materials at that moment.
Vicofa thinks that the total output in the 2011-2012 would be 1.1-1.2 million tons, of which 1 million tons will be exported. Tu has stressed that Vietnamesecoffee companies need to reorganize their operation, or they will lose in the competition with foreigners.