What’s the reason for Vietnam’s low export prices?

Vietnam is one of the world’s biggest producers of coffee, specifically robusta. According to some facts and figures the country accounts for about 20% of global exports, second only to Brazil.

But despite commanding a sizeable share of the market, Vo Thanh Do, a senior government minister, says that Vietnamese coffee makes up about 3% of the worldwide trade from an economic point of view.

The reasons, according to Do, range from the use of obsolete technologies, poor business strategies and a focus on quantity, not quality.

Do was keen to give one example about the widespread use of machinery imported from China and the former Soviet Union that was still used by farmers, despite them being rendered almost obsolete by today’s advancements. The Agriculture Ministry official also claimed that many farmers were relying on manual labour to perform tasks, rather than investing on new equipment. The investment that there has been has come from external sources.

Additionally, the lack of quality coffee being grown disappoints Do, who recounted to the local media that many commentators have praised Vietnam’s climate and soils. But despite these favourable natural conditions, only 17% of robusta exports are categorised as being ‘first-grade’, something which is holding the entire industry’s value back.

Speaking about this, Pham Minh Duc, an economist attached to the World Bank, agreed with Do’s frank assessments, noting that the scale of Vietnam’s agricultural production is ‘much smaller’ than that of similar countries who rely on large-scale agriculture.

Unfortunately for the country, this is a similar problem for other commodities such as fish and rice.

The World Bank predicts that the value of Vietnamese exports could grow by 50% if producers take a greater responsibility in the cultivation of their crop and post-harvest storage.

Some even predicted that the value could rocket upwards by 150% if automation was widely adopted in agrarian sectors, such as coffee.

Also Duc suggested that many coffee farmers need to establish closer links to suppliers and retailers in order to create coffee that will “definitely” fetch higher prices at market.