Transportation crackdown in Vietnam could see coffee prices drop

Coffee prices in Vietnam, the second largest producer after Brazil, rose over the weekend to their highest levels in nearly a month as fears surrounding inclement weather systems that are affecting the South American nation.

Prices are moving upwards due to the continuous concerns that a prolonged dry spell will severely reduce the amount of coffee that the world’s largest coffee producer will be able to export.

The domestic prices for robusta coffee – which accounts for the vast majority of the coffee grown in Vietnam – are hovering at a cent or two under the $2 mark per kg and the recent increase paralleled a similar spike in London’s future market where the contract for July saw a 1.2% rise.

However, contrasting the good financial news for the Asian nation is that the local government are said to be cracking down on the transportation of the coffee to market as instances of trucks being overloaded beyond recommended capacity are becoming more frequent. The exercise has gained in popularity as costs internal costs has risen and exporters are seeking to be as economic as possible, even if that means breaching safety regulations.

“Coffee prices will have to be lower…Truck companies are asking to double the cost of coffee delivery to Ho Chi Minh City, exporters will have to pass on the increase to the domestic prices,” a local trader stated.

This shift in philosophy came into action at the start of the month and inspectors will be checking the weight of all trucks to check that none of them are being loaded beyond capacity, with the aim to reduce the amount of accidents, breakdowns and ensure that the road is not put under too much stress from bloated vehicles.

Delays have been reported, with traders noting that there are plenty of tailbacks in a number of regions near to the predominant coffee growing areas of the country.

picture: Timothy Vollmer. used under Creative Commons