VIETNAM SUSTAINABLECOFFEE PRODUCTION Tran Thi Quynh Chi Institute 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 of2011/2012 reach Output and cultivation area of coffee in Vietnam1,168 million in the period 2007-2011tons, harvestedarea reached 533.8thousand ha overtotal of 570.9thousand cultivatedha.•Output grew by6%/y cultivationarea grew by 3%/y.Vietnam coffee productioncost 2011: 1100 USD/tonsup 45,5% vs. 940 USD/tons2010
Export value jumped due to high price•Vietnamexported 1.2 Vietnam’s coffee export in 2011million tons2011, earnedUS$2.7billion, rising 2%in volume and45.4% in valuecompared to2010•Export price2011: US $2172/ton, a rise of45% whiledomestic priceup by 62%.
Focus on several traditional market Top 10 imported market of Vietnam coffee in 2011 accounted for 69% total export value
Competitiveness of Vietnam coffeein main marketsImporters Market share in export value in 2010 (%) Brazil Vietnam Colombia Peru Indonesia HondurasUS 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 andprocessing 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
Coffee – strategic commodity forexport in Vietnam Vietnam: 2nd coffee largest exporter in the world Contribute 10% of VN agricultural GDP nông nghiệp, 5% of total export value Provide 1 million jobs and create 50% of livelidhood for Central Highland people Coffee, Rice, Fisheries… become the rescue for the country in economic crisis Vietnam 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 farmers No 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 sustainablestandards 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, developmentdonnors and stakeholder groups in the sector to make it sustainably developed
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 taskforce NSAP program International 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
Organization Chart (CoffeeTaskforce) Steering Board MARD, VICOFA, IPSARD NAEC and 4 representatives of private sector Private sector Public sector AssociationNestle, Yara, Syngenta, B Central: 4Cayer, BASF, Cisco, EDE MARD, NAEC, IPSARD, WA Rain Forestconsulting, Dakman, Sara SI UTZ CertifiedLee, Vinacafe etc. Local: DARD, Agro dept. VICOFAFinancial institutions: of district, PAEC, PeopleIFC, IDH, IFAD, Agribank, committee atTechcombank commune, commune farmer association Task force coordinator Technical group Manage provincial projects (technical, monitoring, communication) Execution personnel of private sector, DARD, PAEC, association, WASI, IPSARD
Organization chart (to farmer) Technical Working Commune authorities Group (province) DARD/PAEC Extensionist Leader of farmer groupFarmer Farmer Farmer Farmer Farmer Farmer
WHERE ARE WE?Oct Nov • Aligned the PPP strategy and set up a plan to conduct pilot projects 2010 • Approval of MARD on pilot projectsJan Apr • Build technical model, farmer group model, multi-stakeholders approach 2011 • Scale up strategy: Program “Extensionist attach to demo plot”Jul Dec • Approval of MARD on the first scale up 50 demo plots/farmer groups 2011 • Result of first crop on pilot projects Apr • Combined meeting with financial institutions for micro finance model 2012 • Scale up to national level with the support of financial institutionsNext We are here!
WEF-T strategy “Make Vietnam the recognized reference of Robusta” Scaling-up Scaling-up PPP Pilot Project Existing Project New Projects Farmer group model PPP IFAD PPP with NAEC KPI $23.8 Mio. Extensionist – Technology 30 demo plots 2011 demo plot model Value chain 1,500 farmers 20 demo 80 farmers 1000 farmersPPP Cooperation Programs: Propagation program with WASI, demo plot program with NAEC, involve in IFAD Project, cooperate with big farm, set up cooperative model
NSAP program – IDH support Institutio Sustainabl Financial Climate nal e develop Access Change arrangeInstitional/organization Sustainable Agricultural production: credit -Climatereform program:•Coffee board • Coffee change impact•Farmer groups - rejuvenation (10%) banks, credit profileassociation • Sustainable orgs, donnors - Mitigation•Trader production (community strategyAssociation (25%), national based, daily(VICOFA – WEF quality baseline lending)taskforce) 23
Vietnam – a break through needed forfuture 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