Foreign buyers dominate coffee industry

The market for Viet Nam's unprocessed coffee beans could become dominated by foreign companies, according to leading exporters who spoke at a recent meeting held in HCM City.

Foreigners bought 50 per cent of raw coffee from the 2010 and 2011 crops, according to participants.

They took Dak Lak Province which is the country's biggest coffee producers as an example. They said local coffee farmer harvested 400,000 tonnes in the 2010-11 crop, 180,000 tonnes of which were bought by foreign companies for their export plans.

The situation would likely be more serious in the next crop since foreign companies often double the volume they planned to buy every year. Consequently, domestic enterprises now must face a serious shortage of raw coffee for export, they said.

Do Quyet, deputy general director of Dak Lak September 2nd Import-Export Company, said his company purchased 100,000 tonnes of coffee in the last crop, but it expected to buy only 50,000 or 60,000 tonnes in this crop.

A representative of the Tay Nguyen Coffee Investment, Import and Export Joint Stock Company also revealed that the company had to lower its export target from 140,000 tonnes of coffee to 100,000 tonnes this year because of a shortage of raw material.

The meeting heard many reasons raised by coffee exporters to explain foreign companies'market domination.

One of foreign companies'advantages was their strong financial potential. They could get access to low interest loans while they were able to directly sell coffee products on the London Trading Floor, which can enable them to offer attractive prices for local farmers to buy raw coffee, they said.

Worse still, inconsistent legal positions also created opportunity for foreign companies to conquer the domestic raw material coffee market.

Nguyen Toan Thang, an official of the Dak Lak Planning and Investment Department, said the Trade Law and Decree No 23/2007/ND-CP did not allow foreign companies to directly buy commodities from producers. Meanwhile, the Investment Law did not ban this practice.

Consequently, many foreign companies had set up networks to directly purchase raw material coffee from local farmers, he said.