Vietnam, RI working on coffee export regulation agreement
Vietnam, RI working on coffee export regulation agreement
Ben Rowse, Agence France-Presse, Hanoi
Vietnam and Indonesia, two of the world's biggest coffee producers, are hoping to sign a landmark agreement this week regulating their exports to help prop up world prices, industry sources said on Monday.
Coffee experts and agriculture ministry officials from both countries are working on a memorandum of understanding (MOU) they hope will be inked later this week when Indonesian President Megawati Soekarnoputri visits Vietnam.
Megawati is due to arrive in Hanoi on Wednesday for a three- day visit.
"We have submitted the draft MOU to the government and we are hoping that it will be approved in time," said an official from the Vietnam Coffee and Cocoa Association (VICOFA).
Under the agreement, both Southeast Asian producers would commit themselves to maintaining their coffee exports within a specified volume to prevent flooding the market and driving prices downwards, she said.
In the past decade Vietnam has gone from being barely a blip on the international coffee radar to the world's biggest producer of robusta beans.
Vietnamese coffee production leapt from around 413,600 tons in 1997-1998 to 900,000 tons in 2000-2001. For the 2002-2003 crop year VICOFA has forecast an output of 520,000 tons.
However, the country's massive growth in production prompted rival producers to blame it for the global glut that drove down prices to three-decade lows in 2001.
Market experts say Vietnam was unfairly faulted for the over- supply. They say some blame must lie with the buyers that bought the low-grade robusta beans, prompting farmers to retain their production levels.
Indonesia produces around 500,000 tons of coffee each year, of which more than 85 percent is exported.
The MOU would also see the two countries taking steps to improve the quality of their export beans, the VICOFA official said. She declined to reveal any further details.
Industry analysts say it is too early to say what impact the expected deal will have on the market.
"It is a good sign that two major robusta producers are doing something about the coffee crisis, but it remains to be seen how effective it will be and if it will be properly implemented," said one Hanoi-based expert.
A foreign agriculture consultant based in the Central Highlands, Vietnam's primary coffee growing region, also questioned the practicality of the mooted plan.
"Most farmers sell their beans through state channels that are obligated to buy from them. This either means their beans will now be rejected or it will be bought and put into storage. Either way this results in difficulties."
He conceded, however, that it could help stabilize world coffee prices and perhaps even given them a short-term boost.
"This of course depends on Brazil and other producers not raising their existing volumes in response to Vietnam and Indonesia reducing their market share," he added.
Coffee prices have risen over the past year but have to yet reach their pre-crisis levels.
Vietnam, the world's second largest coffee exporter after Brazil, has drawn up various measures to cut back its robusta output, including switching to high-grade arabica beans in mountainous areas.
Arabica currently accounts for only around two percent of Vietnam's total production.
Last month VICOFA chairman Doan Trieu Nhan said Vietnam was also planning by 2005 to slash by 20 percent its current 500,000 hectares under coffee cultivation to help lift the industry out of the slump.