Coffee farmers in top producer Vietnam are switching to more profitable crops such as avocados, black pepper, and durians to offset rising fertiliser and fuel costs caused by the Ukraine war.
Even with the additional income from these additional crops, farmers are forced to reduce investment in coffee trees, which could result in a 10% drop in production next season compared to a year ago, according to Nguyen Nam Hai, the new chair of the Vietnam Coffee and Cocoa Association.
The country imports large amounts of fertiliser from Ukraine, Russia, and Belarus, and farmers are not benefiting significantly from market prices, despite the fact that they are higher than a year ago, he said in an interview.
Prices remain close to recent highs.
Vietnam is the world’s largest producer of robusta coffee, which is used in instant beverages and espressos. According to the United States Department of Agriculture, the country is expected to account for nearly a fifth of all coffee grown globally in 2021-22, producing more than 31 million bags weighing 60 kilogrammes each.
The war has had little effect on shipments because Russia and Ukraine are not major importers of the country’s coffee, and sales to the critical European Union market have remained stable, Hai said, adding that he expects exports to remain roughly on par with last year.
Green coffee beans continue to dominate exports, and the country’s processed products are having difficulty breaking into the global market, Hai explained, because customers are accustomed to established brands and Nestle SA products.The goal is for processed products to account for up to 25% of coffee export revenue in the next five years, up from less than 10% currently, while domestic consumption is expected to double to up to 12% of total sales.
Additionally, Hai said he wants to encourage local growers to form cooperatives and partner with exporters to form larger farms, which will help standardise cultivation processes and increase the use of high-yield varieties. He also wants to replant ageing trees and increase irrigation to combat climate change.