Thursday, May 15, 2008

Vietnam Coffee

Looking across coffee fields in Vietnam
According to the C&CI, Vietnam exported 1,2 million ton of coffee in 2007, bringing in a total revenue of more then $US 1,8 billion, which equates to a 22,3 % increase in terms of volume and a 50 % rise in value compared with the previous year.
Last year was also the first year that the value of coffee exports from Vietnam exceeded those of rice.
According to the Vietnam Association of Coffee and Cocoa, the 10 key buyers of Vienam's coffee are Germany, the US, Spain, Itlay, Belgium, Poland, France, the Republic of Korea, UK and Japan, which account for some 75 % of the country's total coffee sales.

The fast rising capital accumulation of Vietnamese coffee is producing an unexpected turn of events in coffee prices, and whereas last season, when prices received by Vietnam's coffee farmers were also relatively high by historic standards - and there was a detectable rush by farmers to sell most of their coffee to take advantage of the high price - this season they are much better capitalised, with a 50 % year-on-year increase in turnover and very high profitability.
In fact, an average coffee farmer in Vietnam today may be earning $US 350 a month, which is relatively high by local standards, thus creating an opportunity for coffee farmers to hold on to more of their coffee and wait to see what happens to prices.
As Fortis Agricommodities Monthly (by clicking it you can go to the coffee figueres pdf files) explained, a further effect of this accumulated wealth is that coffee farmers - and those outside the coffee production process - have begun to buy Dollar assets, including physical coffee, as a hedge against inflation.

No comments: