19/09/2023
Fluctuations in the coffee economy
Arabica in Vietnam
Vietnam is the second largest producer in the world after Brazil, with Robusta coffee accounting to 97 per cent of Vietnam's total output. However, coffee farmers in Vietnam have always experienced cycles of boom and bust since the 1980s, making the industry a highly volatile one. Despite the fluctuating global coffee prices, importing countries continue paying a steady price while coffee farmers from exporting countries experience the daily price range.
This pattern saw the production of coffee in Vietnam at 29.3 million bags in 2017, nearly 600,000 bags lower than the USDA estimate for that year, due to losses caused by late rain. The USDA Foreign Agriculture Service has correctly predicted the increase in production in 2018, as shown in a Bloomberg report and forecasted a further increase in 2019 due to better land management, higher replanting rates, more efficient storage and significant private sector involvement. According to Deputy Prime Minister Vuong Dinh Hue, Vietnam expects this growth in 2018 to beat the Government's target of 6.7%, matching 2017's economic growth of 6.8%. However, the extent to which the Government promotes growth at the expense of social inequalities and environmental degradation should also be looked at.
When the global price of coffee dropped in 2001, many farming households had to reduce their daily meal, changed their diets or relied on food donations from the authorities. While the boom allowed children of medium to low income households to attend school and for families to purchase household good like television sets, the declining coffee prices reversed this; children were forced to quit schools and self-employed, subsistence farmers had to find wage labour work.
Poor management might recall the 2013–2014 coffee boom when a bumper harvest of 29.5 million bags (from 17 million the previous year) added to the global oversupply of beans and plummeted coffee prices. This led to nearly half of the 127 local coffee export firms to cease trading due to their inability to repay loans. The amount of non-performing loans or debts in the coffee sector likely to go unpaid stands at 8 trillion d**g (US$379 million), which is around 60 percent of all loans for the coffee industry in Vietnam.
Source: Wiki
