VIETNAM SUSTAINABLE COFFEE PRODUCTION

Tran Thi Quynh ChiInstitute of Policy and Strategy for Agriculture and Rural Development

www.ipsard.gov.vn

What is the presentation about?

Vietnam coffee production – highlights and constraints

Why Vietnam needs sustainable production

Future for Vietnam coffee sector

Increase in coffee production

Output and cultivation area of coffee in Vietnam in the period 2007-2011

•Output of 2011/2012 reach 1,168 million tons, harvested area reached 533.8 thousand ha over total of 570.9 thousand cultivated ha. •Output grew by 6%/y cultivation area grew by 3%/y.

Vietnam coffee production cost 2011: 1100 USD/tons up 45,5% vs. 940 USD/tons 2010

Export value jumped due to high price •Vietnam exported 1.2 million tons 2011, earned US$2.7 billion, rising 2% in volume and 45.4% in value compared to 2010

•Export price 2011: US $2172 /ton, a rise of 45% while domestic price up by 62%.

Vietnam’s coffee export in 2011

Focus on several traditional market

Top 10 imported market of Vietnam coffee in 2011 accounted for 69% total export value

Competitiveness of Vietnam coffee in main markets Importers Market share in export value in 2010 (%)

Brazil Vietnam Colombia Peru Indonesia Honduras

US 23% 8% 16% 4% 4% 2%

Germany 32% 9% 2% 9% 3% 7%

France 7% 3% 2% 1% 1% 3%

Japan 28% 6% 26% 1% 8% 2%

Italia 38% 11% 2% 2% 3% 3%

Belgium 34% 8% 13% 9% 3% 10%

Canada 8% 1% 15% 3% 1% 1%

Spain 21% 21% 7% 1% 2% 2%

UK 12% 7% 9% 3% 6% 5%

Sustainable coffee and processing in Vietnam No one applied TCVN 4193: no compulsory and

roadmap Certified coffee grows up quickly (10% of

production) up to 2011◦ 4C :16 000 growers, 28 000 ha,1.6 million bag. ◦ Utz : 22 000 ha, 76 000 tons

In the past two years, processing industry is overheated development: numberous big projects investing in the instant coffee production by both domestic and foreigner coffee productions.

increase share of final processed cofee products in Vietnam to about 20 percent in the next 5 years

Why Vietnam needs sustainable production

Coffee – strategic commodity for export in VietnamVietnam: 2nd coffee largest exporter in

the worldContribute 10% of VN agricultural GDP

nông nghiệp, 5% of total export valueProvide 1 million jobs and create 50% of

livelidhood for Central Highland peopleCoffee, Rice, Fisheries… become the

rescue for the country in economic crisisVietnam is restructuring the economy,

mainly based on high-value added agriculture

Aging coffee plant 1990s, coffee price surge boom

in coffee plantation (area rose from 120 k ha to over 540 k ha)

40,000 ha of under-20-year-old trees: low growth, more branches without fruits, low productivity and quality.

Diff land, varieties, investment, farming method

Coffee trees suffer from weather, planted with high density, not enough shade trees

area needs replacing and transferring within 5 years: 140-160 thousand ha to keep sustainable productivity and production

Challenges for coffee rejuvenation

Initial cost of coffee rejuvenation: 60 thousand USD/ha.

Low income and savings of farmersNo access to formal credit reluctance of farmers to leave land

bare for 2 years bare or rotated before restarting growing.

Coffee price high and stable growers do not have incentive to rejuvenate.

So, currently, total rejuvenated area: about 5000 ha

Application of sustainable standards

Challenges for sustainability certification: ◦ High cost of application◦ Farmer group set up not easy, not accepted as legal unit.◦ No premium, no guarantee to consume all sustainable

product ◦ Enterprises burden cost of application and premium.

Example of 4C application in VN:◦ Hard for individual grower to apply 4C: requires each

produces at least 1 container (18t) coffee per year. ◦ Cost : high to small coffee growers. Each grower contribute

fee (100 USD in Cooperative) to be a member, ◦ Follow complicated procedure, take notes, keep all

information about inputs, financial and cost. ◦ need big farmer group (30-50 farmers) farmers pay

less fee.

Therefore,the strategy set-up to channel

the investment from the government, development donnors and stakeholder

groups in the sector to make it sustainably developed

COFFEE SUSTAINABLE DEVELOPMENT EFFORTS IN VIETNAM

Sustainable production

Target at developing sustainable coffee production by attaining 25% of coffee produced sustainably by 2016, then, gradually scaling up 5% a year .

Rejuvenation ◦ Rejuvenation plans have been set up for

each producing provice◦ Innitial implementation has started with the

active role of VICOFA, Nestle, Dak Lak and Lam Dong provinces’ investment

◦ Good and new seedlings prepared by WASI to reduce preparation time, while intercropping with other crops to sustain livelihood for farmers

Current coffee sustainable program in Vietnam

World Economic Forum taskforceNSAP programInternational traders program:

Amajaro, Luis Defreyrus, Ecom, Neumann

Poverty production programs of the government for Central Highland

WEF taskforce:Agree on a 10 years vision VN

“Make Vietnam the

recognized reference of

Robusta”(Colombia of Robusta)Agree on the 4 key pillars:

Coffee quality

Coffee quantity

Coffee sustainability

Farmer income

MARD

PUBLIC PRIVATE PARTNERSHIP

WASI

NAEC

Organization Chart (Coffee Taskforce) Steering Board

MARD, VICOFA, IPSARD NAEC and 4 representatives of

private sector

Technical groupManage provincial projects (technical, monitoring,

communication)Execution personnel of private sector, DARD, PAEC, association,

WASI, IPSARD

Task force coordinator

Private sector

Nestle, Yara, Syngenta, Bayer, BASF, Cisco, EDE consulting, Dakman, Sara Lee, Vinacafe etc.

Financial institutions: IFC, IDH, IFAD, Agribank, Techcombank

Public sector

Central: MARD, NAEC, IPSARD, WASI

Local: DARD, Agro dept. of district, PAEC, People committee at commune, commune farmer association

Association

4CRain ForestUTZ CertifiedVICOFA

Organization chart (to farmer)

Technical Working Group (province)

Commune authoritiesDARD/PAEC

ExtensionistLeader of farmer

group

Farmer

Farmer

Farmer

Farmer

Farmer

Farmer

WHERE ARE WE?•Aligned the PPP strategy and set up a plan to conduct pilot projects

Jan Apr 2011

•Approval of MARD on pilot projects•Build technical model, farmer group model, multi-stakeholders approach

Jul Dec 2011 •Scale up strategy: Program “Extensionist attach to demo plot”•Approval of MARD on the first scale up 50 demo plots/farmer groups

Apr2012

•Result of first crop on pilot projects•Combined meeting with financial institutions for micro finance model

Next •Scale up to national level with the support of financial institutions

We are here!

WEF-T strategy

PPP Pilot Project

Farmer group model

KPI Technology Value chain 80 farmers

Scaling-upExisting Project

PPP IFAD $23.8 Mio. 30 demo plots

2011 1,500 farmers

Scaling-upNew Projects

PPP with NAEC Extensionist –

demo plot model 20 demo 1000 farmers

PPP Cooperation Programs: Propagation program with WASI, demo plot program

with NAEC, involve in IFAD Project, cooperate with big farm, set up cooperative

model

“Make Vietnam the recognized reference of Robusta”

NSAP program – IDH support

23

Institional/organization reform•Coffee board•Farmer groups - association•Trader Association (VICOFA – WEF taskforce)

Sustainable

develop

Financial Access

Agricultural credit program: banks, credit orgs, donnors (community based, daily lending)

Sustainable production:• Coffee rejuvenation (10%)• Sustainable production (25%), national quality baseline

Climate Change

-Climate change impact profile- Mitigation strategy

Institutional

arrange

Vietnam – a break through needed for future development

1st break through: trade liberalization and land ownership policy in 1990s create the booming of coffee production in Vietnam

2nd break through will depend on:◦Institutional reform for coffee sector in

Vietnam to coordinate and regulate the sector

◦Public – private partnership investment encouragement

Thanks for your attention!