Required Report - public distribution

**Date:** 5/23/2006

**GAIN Report Number:** VM6029

VM6028

**Vietnam**

**Coffee**

**Annual report**

**2006**

**Approved by:**

![](media/image1.wmf)John Wade

FAS Hanoi, U.S. Embassy

**Prepared by:**

Nguyen Thi Huong/Tran Quoc Quan

**Report Highlights:**

Production in 2006/07 should increase more than 10 percent as improved
weather increases yield. However, planted area will stay flat as farmers
are unsure whether current high prices will last.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Semi-Annual Report

Hanoi \[VM1\]

\[VM\]

**TABLE OF CONTENTS**

[SECTION I: STATISTICAL TABLES 3](#section-i-statistical-tables)

[Table 1: Vietnam's coffee Production, Supply and Demand (PSD table)
3](#table-1-vietnams-coffee-production-supply-and-demand-psd-table)

[Table 2: Vietnam's export trade matrix
4](#table-2-vietnams-export-trade-matrix)

[SECTION II: SITUATION AND OUTLOOK 4](#section-ii-situation-and-outlook)

[PRODUCTION 4](#production)

[Vietnam's 2005/06 Coffee Crop 4](#vietnams-200506-coffee-crop)

[Vietnam's 2006/07 coffee Crop 4](#vietnams-200607-coffee-crop)

[Table 3: Vietnam Coffee Production in Metric Tons (Marketing Year,
Oct-Sep)
4](#table-3-vietnam-coffee-production-in-metric-tons-marketing-year-oct-sep)

[CONSUMPTION 5](#consumption)

[STOCKS 5](#stocks)

[TRADE 5](#trade)

[Table 4: Vietnam's coffee exports in 5 marketing years
6](#table-4-vietnams-coffee-exports-in-5-marketing-years)

[Graph 1: Vietnam's coffee exports in 5 marketing years
6](#graph-1-vietnams-coffee-exports-in-5-marketing-years)

[PRICES 7](#prices)

[Table 5: Robusta coffee bean domestic prices in Dak Lak province in the
first half of 2005/2006 crop.
7](#table-5-robusta-coffee-bean-domestic-prices-in-dak-lak-province-in-the-first-half-of-20052006-crop.)

[Table 6: Arabica coffee bean prices in Lam Dong province in the first
half of 05/06 crop
7](#table-6-arabica-coffee-bean-prices-in-lam-dong-province-in-the-first-half-of-0506-crop)

[Graph 2: Vietnam's average coffee export prices in 12 marketing years
8](#graph-2-vietnams-average-coffee-export-prices-in-12-marketing-years)

[POLICY 8](#policy)

[OTHER INDUSTRY ACTIVITIES 8](#other-industry-activities)

#   {#section .unnumbered}

# SECTION I: STATISTICAL TABLES 

# 

## Table 1: Vietnam's coffee Production, Supply and Demand (PSD table)

<table style="width:100%;">
<colgroup>
<col style="width: 27%" />
<col style="width: 11%" />
<col style="width: 1%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 10%" />
<col style="width: 1%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Country</strong></td>
<td colspan="2"><p id="vietnam" class="heading">Vietnam</p></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td><strong>Commodity</strong></td>
<td colspan="4"><strong>Coffee, Green</strong></td>
<td colspan="8"></td>
</tr>
<tr class="odd">
<td colspan="13">(1000 HA)(MILLION TREES)(1000 60 KG BAGS)</td>
</tr>
<tr class="even">
<td></td>
<td>2005</td>
<td colspan="2">Revised</td>
<td colspan="2">2006</td>
<td colspan="2">Estimate</td>
<td colspan="2">2007</td>
<td colspan="2">Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA Official [Old]</td>
<td colspan="2">Post Estimate[New]</td>
<td colspan="2">USDA Official [Old]</td>
<td colspan="2">Post Estimate[New]</td>
<td colspan="2">USDA Official [Old]</td>
<td colspan="2">Post Estimate[New]</td>
<td></td>
</tr>
<tr class="even">
<td>Market Year Begin</td>
<td></td>
<td colspan="2">10/2004</td>
<td colspan="2"></td>
<td colspan="2">10/2005</td>
<td colspan="2"></td>
<td colspan="2">10/2006</td>
<td></td>
</tr>
<tr class="odd">
<td>Area Planted</td>
<td>500</td>
<td colspan="2">500</td>
<td colspan="2">500</td>
<td colspan="2">495</td>
<td colspan="2">0</td>
<td colspan="2">495</td>
<td></td>
</tr>
<tr class="even">
<td>Area Harvested</td>
<td>495</td>
<td colspan="2">495</td>
<td colspan="2">485</td>
<td colspan="2">485</td>
<td colspan="2">0</td>
<td colspan="2">485</td>
<td></td>
</tr>
<tr class="odd">
<td>Bearing Trees</td>
<td>619</td>
<td colspan="2">619</td>
<td colspan="2">605</td>
<td colspan="2">605</td>
<td colspan="2">0</td>
<td colspan="2">610</td>
<td></td>
</tr>
<tr class="even">
<td>Non-Bearing Trees</td>
<td>6</td>
<td colspan="2">6</td>
<td colspan="2">12</td>
<td colspan="2">12</td>
<td colspan="2">0</td>
<td colspan="2">6</td>
<td></td>
</tr>
<tr class="odd">
<td>TOTAL Tree Population</td>
<td>625</td>
<td colspan="2">625</td>
<td colspan="2">617</td>
<td colspan="2">617</td>
<td colspan="2">0</td>
<td colspan="2">616</td>
<td></td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>300</td>
<td colspan="2">300</td>
<td colspan="2">300</td>
<td colspan="2">190</td>
<td colspan="2">198</td>
<td colspan="2">178</td>
<td></td>
</tr>
<tr class="odd">
<td>Arabica Production</td>
<td>383</td>
<td colspan="2">383</td>
<td colspan="2">333</td>
<td colspan="2">333</td>
<td colspan="2">0</td>
<td colspan="2">350</td>
<td></td>
</tr>
<tr class="even">
<td>Robusta Production</td>
<td>14117</td>
<td colspan="2">14117</td>
<td colspan="2">12000</td>
<td colspan="2">12000</td>
<td colspan="2">0</td>
<td colspan="2">13500</td>
<td></td>
</tr>
<tr class="odd">
<td>Other Production</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td></td>
</tr>
<tr class="even">
<td>TOTAL Production</td>
<td>14500</td>
<td colspan="2">14500</td>
<td colspan="2">12333</td>
<td colspan="2">12333</td>
<td colspan="2">0</td>
<td colspan="2">13833</td>
<td></td>
</tr>
<tr class="odd">
<td>Bean Imports</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td></td>
</tr>
<tr class="even">
<td>Roast &amp; Ground Imports</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td></td>
</tr>
<tr class="odd">
<td>Soluble Imports</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td></td>
</tr>
<tr class="even">
<td>TOTAL Imports</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td></td>
</tr>
<tr class="odd">
<td>TOTAL SUPPLY</td>
<td>14800</td>
<td colspan="2">14800</td>
<td colspan="2">12633</td>
<td colspan="2">12523</td>
<td colspan="2">198</td>
<td colspan="2">14011</td>
<td></td>
</tr>
<tr class="even">
<td>Bean Exports</td>
<td>13900</td>
<td colspan="2">13950</td>
<td colspan="2">11817</td>
<td colspan="2">11667</td>
<td colspan="2">0</td>
<td colspan="2">13000</td>
<td></td>
</tr>
<tr class="odd">
<td>Roast &amp; Ground Exports</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td></td>
</tr>
<tr class="even">
<td>Soluble Exports</td>
<td>17</td>
<td colspan="2">42</td>
<td colspan="2">18</td>
<td colspan="2">42</td>
<td colspan="2">0</td>
<td colspan="2">45</td>
<td></td>
</tr>
<tr class="odd">
<td>TOTAL Exports</td>
<td>13917</td>
<td colspan="2">13992</td>
<td colspan="2">11835</td>
<td colspan="2">11709</td>
<td colspan="2">0</td>
<td colspan="2">13045</td>
<td></td>
</tr>
<tr class="even">
<td>Rst, Ground Domestic Consumption</td>
<td>583</td>
<td colspan="2">583</td>
<td colspan="2">600</td>
<td colspan="2">600</td>
<td colspan="2">0</td>
<td colspan="2">618</td>
<td></td>
</tr>
<tr class="odd">
<td>Soluble Dom. Consumption</td>
<td>0</td>
<td colspan="2">35</td>
<td colspan="2">0</td>
<td colspan="2">36</td>
<td colspan="2">0</td>
<td colspan="2">37</td>
<td></td>
</tr>
<tr class="even">
<td>TOTAL Dom. Consumption</td>
<td>583</td>
<td colspan="2">618</td>
<td colspan="2">600</td>
<td colspan="2">636</td>
<td colspan="2">0</td>
<td colspan="2">655</td>
<td></td>
</tr>
<tr class="odd">
<td>Ending Stocks</td>
<td>300</td>
<td colspan="2">190</td>
<td colspan="2">198</td>
<td colspan="2">178</td>
<td colspan="2">0</td>
<td colspan="2">311</td>
<td></td>
</tr>
<tr class="even">
<td>TOTAL DISTRIBUTION</td>
<td>14800</td>
<td colspan="2">14800</td>
<td colspan="2">12633</td>
<td colspan="2">12523</td>
<td colspan="2">0</td>
<td colspan="2">14011</td>
<td></td>
</tr>
</tbody>
</table>

#  

## Table 2: Vietnam's export trade matrix

+---------------------+---------------+-----------------+------------+
| ######## C          | Vietnam       |                 |            |
| ountry {#country-1} |               |                 |            |
+---------------------+---------------+-----------------+------------+
| **Commodity**       | Coffee, Green |                 |            |
+---------------------+---------------+-----------------+------------+
| Time Period         | Oct.-Mar.     | Units:          | MT         |
+---------------------+---------------+-----------------+------------+
| Exports for:        | 2004          |                 | **2005**   |
+---------------------+---------------+-----------------+------------+
| U.S.                | 92123         | U.S.            | 66801      |
+---------------------+---------------+-----------------+------------+
| Others              |               | Others          |            |
+---------------------+---------------+-----------------+------------+
| Germany             | 77492         | Germany         | 63074      |
+---------------------+---------------+-----------------+------------+
| Spain               | 34745         | Spain           | 39736      |
+---------------------+---------------+-----------------+------------+
| Italy               | 33862         | Italy           | 28844      |
+---------------------+---------------+-----------------+------------+
| Korea               | 18524         | Korea           | 16099      |
+---------------------+---------------+-----------------+------------+
| England             | 16860         | England         | 13298      |
+---------------------+---------------+-----------------+------------+
| Belgium             | 16045         | Poland          | 13125      |
+---------------------+---------------+-----------------+------------+
| France              | 15657         | Ecuador         | 11434      |
+---------------------+---------------+-----------------+------------+
| Ecuador             | 12159         | Japan           | 10447      |
+---------------------+---------------+-----------------+------------+
| Philippines         | 10882         | Belgium         | 10318      |
+---------------------+---------------+-----------------+------------+
| India               | 9158          | Mexico          | 10175      |
+---------------------+---------------+-----------------+------------+
| Total for Others    | 245384        |                 | 216550     |
+---------------------+---------------+-----------------+------------+
| Others not Listed   | 149093        |                 | 87649      |
+---------------------+---------------+-----------------+------------+
| Grand Total         | 486600        |                 | 371000     |
+---------------------+---------------+-----------------+------------+

# SECTION II: SITUATION AND OUTLOOK

# 

## **PRODUCTION**

## 

### Vietnam's 2005/06 Coffee Crop

Post keeps Vietnam's 2005/06 estimated coffee production unchanged from
earlier estimates at 740 tmt (12.33 million bags) down significantly
from 2004/05 due to unfavorable weather.

## 

### Vietnam's 2006/07 coffee Crop

Vietnam 2006/2007 coffee production is forecast at 830 tmt (13.83
million bags) due to better weather in late 2005 and early 2006 as
compared to the same period in the previous crop year. Post estimates
coffee yield and production of the 2006/07 crop will increase by more
than 10 percent.

### Table 3: Vietnam Coffee Production in Metric Tons (Marketing Year, Oct-Sep)

Unit: thousand tons

<table style="width:100%;">
<colgroup>
<col style="width: 37%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 11%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"> </td>
<td colspan="3"><p>2004/05</p>
<p> </p></td>
<td colspan="3">2005/06</td>
<td colspan="2">2006/2007</td>
</tr>
<tr class="even">
<td>Marketing year begins</td>
<td colspan="3">10/2004</td>
<td colspan="3">10/2005</td>
<td colspan="3">10/2006</td>
</tr>
<tr class="odd">
<td> </td>
<td colspan="2">Old</td>
<td>Revised</td>
<td colspan="2">Old</td>
<td>Revised</td>
<td colspan="2">Old</td>
<td>Revised</td>
</tr>
<tr class="even">
<td>Sown Area (thousand ha)</td>
<td colspan="2">500</td>
<td>500</td>
<td colspan="2">500</td>
<td>495</td>
<td colspan="2">500</td>
<td>500</td>
</tr>
<tr class="odd">
<td>Area Harvested (thousand ha)</td>
<td colspan="2">495</td>
<td>495</td>
<td colspan="2">485</td>
<td>485</td>
<td colspan="2">450</td>
<td>485</td>
</tr>
<tr class="even">
<td>Beginning Stock</td>
<td colspan="2">18</td>
<td>18</td>
<td colspan="2">18</td>
<td>11</td>
<td colspan="2">29</td>
<td>11</td>
</tr>
<tr class="odd">
<td>Production (green bean)</td>
<td colspan="2">870</td>
<td>870</td>
<td colspan="2">740</td>
<td>740</td>
<td colspan="2">730</td>
<td>830</td>
</tr>
<tr class="even">
<td>Average coffee yield (ton/ha)</td>
<td colspan="2">1.76</td>
<td>1.76</td>
<td colspan="2">1.53</td>
<td>1.53</td>
<td colspan="2">1.62</td>
<td>1.71</td>
</tr>
</tbody>
</table>

Source: Vicofa, FAS estimate

# 

# CONSUMPTION

Post estimates Vietnam's CY 2005/2006 domestic consumption at 38 tmt (or
636,000 bags). Consumption in the next crop is forecast to increase by 3
percent to more than 39 tmt (or 655,000 bags). However domestic
consumption will still only be 5 percent of total production.

In recent years both ground and soluble coffee products have been
gaining acceptance in the domestic market. Cafe Moment, Vinacafe,
Nescafe, Trung Nguyen, G7, Truc Tam, VN, Simexco, and Bien Hoa are
popular brands. There are more than 20 brands of soluble coffee products
alone. However, just a few key players dominate the market, Vinacafe
accounts for 50.4 percent of the market and Nescafe for 33.2 percent.

# 

# STOCKS

# 

No official data on coffee stocks are available in Vietnam. Post has
revised down the carry-in stocks for 2005/06 because of higher than
expected exports in 2004/05. Foreign buyers are currently holding most
stocks. According to coffee traders, coffee prices should be stable
through the rest of 2005/06. As a result, most growers have already sold
their coffee. Good export prices should allow Vietnam to further reduce
stocks by the end of 2005/06.

# 

# TRADE

According to the Vietnam Coffee and Cocoa Association (VICOFA) and
Ministry of Trade (MOT), Vietnam's coffee exports in the first 6 months
of 2005/06 dropped in volume, but increased in value. Vietnam's coffee
exports during the period were recorded at 371 tmt (6.18 million bags),
a drop of 15 percent compared with the same period a year before.
However, coffee export value increased by 25 percent (see table 4).

Post estimates Vietnam's 2005/2006 coffee export at 700 tmt (11.7
million bags).

In the first half of the CY 2005/2006, the United States and Germany
remained the top importers of Vietnamese coffee. Spain, Italy and the
Republic of Korea rounded off the list of the top five buyer countries.

### Table 4: Vietnam's coffee exports in 5 marketing years 

<table>
<colgroup>
<col style="width: 7%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 6%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Month</strong></td>
<td colspan="2"><strong>2001/2002</strong></td>
<td colspan="2"><strong>2002/2003</strong></td>
<td colspan="2"><strong>2003/2004</strong></td>
<td colspan="2"><strong>2004/2005</strong></td>
<td colspan="2"><strong>2005/2006</strong></td>
<td colspan="2"><p><strong>% Change of</strong></p>
<p><strong>MY 04/05 &amp; 05/06</strong></p></td>
</tr>
<tr class="even">
<td></td>
<td>Vol. (tmt)</td>
<td><p>Value</p>
<p>(US$ mil.)</p></td>
<td>Vol. (tmt)</td>
<td><p>Value</p>
<p>(US$ mil.)</p></td>
<td>Vol. (tmt)</td>
<td><p>Value</p>
<p>(US$ mil.)</p></td>
<td><p>Vol.</p>
<p>(tmt)</p></td>
<td><p>Value</p>
<p>(US$ mil.</p></td>
<td><p>Vol.</p>
<p>(tmt)</p></td>
<td><p>Value</p>
<p>(US$ mil.)</p></td>
<td>Vol.</td>
<td>Value</td>
</tr>
<tr class="odd">
<td>Oct.</td>
<td>44</td>
<td>15</td>
<td>64</td>
<td>32</td>
<td>46</td>
<td>30</td>
<td>65</td>
<td>40</td>
<td>57</td>
<td>46</td>
<td>-12</td>
<td>15</td>
</tr>
<tr class="even">
<td>Nov.</td>
<td>62</td>
<td>20</td>
<td>54</td>
<td>30</td>
<td>55</td>
<td>35</td>
<td>55</td>
<td>34</td>
<td>55</td>
<td>46</td>
<td>0</td>
<td>35</td>
</tr>
<tr class="odd">
<td>Dec.</td>
<td>88</td>
<td>28</td>
<td>64</td>
<td>38</td>
<td>85</td>
<td>53</td>
<td>87</td>
<td>56</td>
<td>63</td>
<td>57</td>
<td>-27</td>
<td>2</td>
</tr>
<tr class="even">
<td>Jan.</td>
<td>94</td>
<td>31</td>
<td>67</td>
<td>44</td>
<td>69</td>
<td>44</td>
<td>82</td>
<td>54</td>
<td>64</td>
<td>66</td>
<td>-22</td>
<td>22</td>
</tr>
<tr class="odd">
<td>Feb.</td>
<td>72</td>
<td>23</td>
<td>54</td>
<td>37</td>
<td>87</td>
<td>57</td>
<td>64</td>
<td>43</td>
<td>52</td>
<td>56</td>
<td>-19</td>
<td>30</td>
</tr>
<tr class="even">
<td>Mar.</td>
<td>72</td>
<td>26</td>
<td>62</td>
<td>40</td>
<td>83</td>
<td>54</td>
<td>82</td>
<td>60</td>
<td>80</td>
<td>89</td>
<td>-2.4</td>
<td>48</td>
</tr>
<tr class="odd">
<td><strong>Sub-total</strong></td>
<td><strong>432</strong></td>
<td><strong>143</strong></td>
<td><strong>365</strong></td>
<td><strong>221</strong></td>
<td><strong>425</strong></td>
<td><strong>273</strong></td>
<td><strong>435</strong></td>
<td><strong>287</strong></td>
<td><strong>371</strong></td>
<td><strong>360</strong></td>
<td><strong>-15</strong></td>
<td><strong>25</strong></td>
</tr>
<tr class="even">
<td>April</td>
<td>43</td>
<td>17</td>
<td>54</td>
<td>34</td>
<td>83</td>
<td>54</td>
<td>82</td>
<td>63</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>May</td>
<td>46</td>
<td>19</td>
<td>56</td>
<td>37</td>
<td>79</td>
<td>52</td>
<td>71</td>
<td>59</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>June</td>
<td>37</td>
<td>16</td>
<td>58</td>
<td>36</td>
<td>119</td>
<td>79</td>
<td>71</td>
<td>59</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>July</td>
<td>45</td>
<td>20</td>
<td>56</td>
<td>35</td>
<td>56</td>
<td>37</td>
<td>65</td>
<td>54</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Aug.</td>
<td>52</td>
<td>22</td>
<td>54</td>
<td>34</td>
<td>51</td>
<td>33</td>
<td>58</td>
<td>48</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Sept.</td>
<td>59</td>
<td>27</td>
<td>48</td>
<td>32</td>
<td>56</td>
<td>35</td>
<td>55</td>
<td>45</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Grand Total</strong></td>
<td><strong>714</strong></td>
<td><strong>264</strong></td>
<td><strong>691</strong></td>
<td><strong>429</strong></td>
<td><strong>869</strong></td>
<td><strong>563</strong></td>
<td><strong>837</strong></td>
<td><strong>615</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

Source: Vicofa and Ministry of Trade

### 

### Graph 1: Vietnam's coffee exports in 5 marketing years 

![](media/image2.wmf)

*Source: Vicofa*

# PRICES

## 

Average prices of Vietnam Robusta coffee bean (grade 1) were between VND
17,500-18,500/kg (\$1.1-\$1.16/kg) in March 2006, an increase of 28
percent compared with prices quoted in October 2005 and double what they
were 18 months ago. However, in recent months the rise has moderated. In
March price decreased by 6 percent compared with the previous month.
This is in line with recently moderating world prices.

Table 5 illustrates Robusta coffee prices in Dak Lak, the largest
coffee-producing province in Vietnam. Local prices for the very small
Arabica crop are stated in Table 6.

### Table 5: Robu**s**ta coffee bean domestic prices in Dak Lak province in the first half of 2005/2006 crop. 

Unit: VND/kg

+-------+------------------+-------------------+----------------------+
| **Mo  | **Coffee         |                   |                      |
| nth** | grades**         |                   |                      |
+-------+------------------+-------------------+----------------------+
|       | **General        | ###### **Robusta  | **Robusta coffee     |
|       | Robusta bean**   | coffee grade R1** | grade R2**           |
|       |                  |                   |                      |
|       | ####### VND/kg   | VND/kg            | (5%) VND/kg          |
+-------+------------------+-------------------+----------------------+
| Oct.  | 12,500-13,500    | 13,500-14,600     | 12,900-14,200        |
| 05    |                  |                   |                      |
+-------+------------------+-------------------+----------------------+
| Nov.  | 13,500-14,500    | 15,500-16,200     | 15,000-15,500        |
| 05    |                  |                   |                      |
+-------+------------------+-------------------+----------------------+
| Dec.  | 15,300-16,300    | 16,600-16,800     | 16,000-16,100        |
| 05    |                  |                   |                      |
+-------+------------------+-------------------+----------------------+
| Jan.  | 17,600-18,500    | 19,300-19,800     | 18,900-19,500        |
| 06    |                  |                   |                      |
+-------+------------------+-------------------+----------------------+
| Feb.  | 17,700-18,200    | 19,000-19,400     | 18,700-19,100        |
| 06    |                  |                   |                      |
+-------+------------------+-------------------+----------------------+
| Mar.  | 16,500-17,500    | 17,500-18,500     | 16,500-17,800        |
| 06    |                  |                   |                      |
+-------+------------------+-------------------+----------------------+

*Source: Vicofa, MOT, MARD, FAS (\$1=VND 15,900)*

### Table 6: Arabica coffee bean prices in Lam Dong province in the first half of 05/06 crop

### 

**Unit: VND/kg**

+------------------+--------+-------+-------+-------+-------+-------+
| #####            | **Oct  | *     | *     | *     | *     | ####  |
|                  | 05**   | *Nov. | *Dec. | *Jan. | *Feb. |       |
| ###              |        | 05**  | 05**  | 06**  | 06**  | ####  |
| ## Coffee grades |        |       |       |       |       |       |
|                  |        |       |       |       |       | *     |
|                  |        |       |       |       |       | *Mar. |
|                  |        |       |       |       |       | 06**  |
+------------------+--------+-------+-------+-------+-------+-------+
| Arabica coffee   | 2      | 25,   | 27,0  | 29,   | 29,   | 22,   |
| -- Grade 1       | 3,000- | 000-2 | 00-27 | 000-2 | 000-2 | 500-2 |
|                  | 25,500 | 5,700 | ,500- | 9,100 | 9,100 | 5,500 |
+------------------+--------+-------+-------+-------+-------+-------+

Source: Vicofa, MOT, MARD, FAS (\$1=VND 15,900)

According to local traders, domestic coffee prices should maintain their
current high level in the second half of the 2005/2006-crop year because
of this year's smaller crop. Despite lower coffee harvest volume this
crop, the typical coffee growers seem to be pleased with current prices
as they can earn some profit from selling coffee. Plantings have not
increased however as farmers realize the return of better weather and
increased production in 2006/07 could well mean lower prices.

## 

Since 95 percent of production goes to export, export prices are closely
related to domestic prices and have followed the same general trend. So
far, the monthly average export price in MY 2005/06 is the highest in
the last 5 years. The selling price in February 2006 was sometimes
higher than USD 1,200/mt on an FOB basis, the highest selling price in
the last 6 years. However, prices are still far off historical highs
(see graph 2 below).

###  Graph 2: Vietnam's average coffee export prices in 12 marketing years

![](media/image3.wmf)

*Source: Vicofa*

# POLICY

With the lessons learned from the over supply of coffee that contributed
to the sharp drop in world prices over the last decade, Vietnam's
government has readjusted its coffee strategy toward a more rational
production. The government is encouraging Robusta farmers in marginal
areas to replace their coffee with other crops such as cashew, cocoa or
subsistence crops. In suitable areas (i.e. high altitudes) the
government promotes the careful and slow expansion of Arabica
plantations. The key policy goal is for Vietnam Coffee to reduce both
coffee area and production and adjust quality until it is in better
long-term equilibrium with the world market.

The government is proceeding only slowly with market reforms in the
coffee sector. In March 2006, the Prime Minister promulgated a decision
to restructure the Vietnam Coffee Corporation (Vinacafe), the main state
company involved in the sector. Some of Vinacafe's subsidiaries will be
dissolved and one third of its companies will be maintained as before.
However the majority will become joint stock companies with a ratio of
51 percent state to 49 percent private shares. In 2005, Vinacafe posted
a profit of VND90 billion (\$5.6 million) after 5 consecutive years of
loss. The biggest loss was VND268 billion (\$17 million) in 2001 with a
total loss over the period of about VND350 billion (\$22 million). The
restructuring is intended to make the company more competitive but the
limited scope reflects the continued desire of elements in the
government to maintain some state influence.

# OTHER INDUSTRY ACTIVITIES

-   The Ministry of Science & Technology approved new government
    technical standards TCVN 4193: 2005 for coffee beans in it's
    decision No. 227/QD-BKHCN dated 17^th^ February 2006.

-   In Vietnam, an increasing number of companies have products licensed
    with Utz Kapeh certificates (sustainable coffee production
    certificates). At present, there are 6 companies having Utz Kapeh
    certificate for their coffee products. These are Thang Loi, Phuoc
    An, Eapok and Thang Muoi in Daklak province: Tan Lam in Quang Tri
    province and Atlantic Commodities Vietnam Ltd (ACOM) in Lam dong
    province. Volumes though are still relatively small.