Report Highlights:

Post revises its coffee production estimate in marketing year (MY) 2013/14 up to about 29 million 60 kg-bags (bags), or 1.74 million metric tons (MMT) of green coffee, about a 9 percent increase from the previous year due to significant additional output from newly productive and replanted areas, and higher yield attributed to very favorable weather conditions. Accordingly, Post’s total coffee export forecast for MY 2013/14 is 25 million bags, or 1.5 MMT Green Bean Equivalent (GBE) due to record exportable supplies.

Post also revises its total production estimate for MY 2012/13 up to 26.5 million bags, or 1.59 MMT GBE, due to relatively strong exports of green bean and reported high level of ending stocks in MY 2012/13.

Executive Summary:

Coffee cultivated area continues to expand in major coffee growing areas, especially in Dak Lak, Lam Dong and Dak Nong provinces, despite the Government of Vietnam (GOV)’s recommendation to maintain at 500,000 ha of coffee area in Vietnam, due to the price competitiveness of coffee vis-à-vis other crops the past three marketing years. During this period, coffee prices have remained relatively high, providing a strong incentive for farmers to plant additional area. Based on estimated statistics from the Ministry of Agriculture and Rural Development (MARD), Provincial Departments of Agriculture and Rural Development, and local coffee industry, Vietnam’s coffee area is estimated at 633,295 hectares (ha) in 2013, about a 3 percent increase from the previous year. Actual coffee area likely exceeds GOV official estimates.

Vietnam’s coffee production has been increasing steadily over the past three marketing years due to five main factors: (1) coffee growing area expansion; (2) fairly favorable weather conditions (especially for the crop harvested Fall 2013); (3) better knowledge and investment from farmers, including proper cultivation technique, reasonable irrigation, and better fertilizer application; (4) better breeding varieties of high yield and rust disease resistance, which have shown good development in new branches and cherries; and (5) farm-gate and export prices remained relatively stable, creating a strong incentive for coffee growers to expand area and replace aging trees.

For these reasons, Post revises the initial forecast of coffee production for the MY 2013/14 crop up to 29 million bags or 1.74 MMT, about a 9 percent increase over the previous crop year, and a record. Given record production, exportable supplies will also be high. Post’s total export estimate for MY2013/14 is 25 million bags, or 1.5 MMT GBE, also a record.

Given the strong growth of domestic coffee consumption supported by many local producers’ marketing strategies, Post maintains its forecast of MY 2013/14 domestic consumption is 2 million bags, or 120 thousand metric tons (TMT) GBE, up 10 percent from the previous MY.


According to local exporters, coffee cultivated area continues to expand in the major coffee growing areas in Vietnam. Based on estimates from MARD, Provincial Departments of Agriculture and Rural Development, and local coffee industry, Vietnam’s coffee area is estimated at 633,295 hectare (ha) in 2013, about a 3 percent rise from 616,407 ha in 2012, and about an 11 percent increase over 2011 (571,000 ha). Dak Lak, Lam Dong, and Dak Nong Provinces continue to expand coffee area (mainly Robusta coffee), and account for 76 percent of total growing area in Vietnam. Arabica cultivation was estimated at about 42,000 ha, accounting for about 6.6 percent of total coffee area. Official area estimates likely understate the actual coffee area.

In general, weather has been quite favorable for the development of coffee trees for the 2013 coffee crop. Despite concerns of dry weather in the first quarter of 2013, the wet season arrived earlier than anticipated, and dry areas in the Central Highlands began to receive rains in late March and received normal precipitation in April and May 2013, the critical period of development for coffee.

According to local traders, favorable weather more than offset the reported productivity drop with lower yielding, aging coffee trees (making up a large portion of total area) and the small areas that remained drought affected. Additionally, coffee growers have benefited from favorable interest rates and have invested more in recent years to ensure the proper application of irrigation, fertilizer, storage, and replanting of aging coffee area. According to MARD, there are about 140,000-160,000 ha of ageing trees needing to be replanted over the next 5-10 years, and about 200,000 ha by 2020.

Surveys and observations from local exporters, industry, and Post indicate that coffee trees, in general, have produced more productive branches and more cherries per branch this year than in previous years. Local traders and exporters indicate that the yield increase due to favorable weather will likely contribute to a bumper crop. For these reasons, Post revises its initial forecast of coffee production in MY 2013/14 up to 29 million bags or 1.74 MMT, about 9 percent increase over the previous crop year. Post also revises its forecast for Arabica coffee production in MY2013/14 to about 70 TMT of green coffee, or 1,167 60-kg bags as Arabica area continues to expand significantly in Lam Dong, and as additional output became available from newly productive, and replanted coffee areas.

Post also revises its production estimate for MY 2012/13 upwards to 26.5 million bags or 1.59 MMT of green coffee beans. This is attributed to strong exports during the MY and reported large MY ending stocks being held by farmers, dealers, and exporters.


Vietnames domestic consumption continues to grow. Café culture and retail coffee shops continue to spread in Vietnam with presence of many giant players such as Starbucks, Trung Nguyen, Highlands, Vinacafe, Gloria Jeans, and The Coffee Bean. Vicofa and its members recently organized a coffee tasting event for tow months in Hanoi from August through October 2013 in Vicofa’s Headquarters, in order to promote a variety of coffee brands from different local coffee manufacturers and to increase local coffee consumption. Participating in this coffee tasting event, were seven local coffee producers.

Post maintains the domestic consumption estimate at 1.83 million bags, or 110 TMT GBE the MY 2012/13, about 7 percent of total annual coffee domestic production, and 2 million bags, or 120 TMT GBE in MY 2013/14, up 10 percent from the previous MY. The expanding coffee retail sector will contribute to stronger coffee consumption growth next MY, and into the foreseeable future.



According to data from MARD and Global Trade Atlas (GTA), Vietnam exported 23.6 million bags, or 1.4 MMT of green coffee in MY 2012/13, a drop of about 1.6 percent from the previous MY.

In MY 2012/13, Vietnam exported coffee beans to 70 countries worldwide. The top eighteen markets accounted for about 92 percent of total green coffee bean exports. The United States is the largest importer of Vietnamese green coffee beans, and Germany is second.

The export pace through the first 4 months of MY 2012/13 was very strong. However, beginning in February, Vietnam’s coffee bean exports dropped significantly, relative to the previous MY, due to falling export prices in global markets. Additionally, local exporters continue to struggle with the GOV’s value added tax (VAT) refund policy which is creating a delay in transferring VAT refunds to local coffee exporters and has also reportedly affected exports during MY 2012/13. At the end of the MY, dealers and exporters reported withholding exports from the market in anticipation of higher prices. Accordingly, ending stocks for MY2012/13 increased considerably.

According to official data from Vietnam’s General Customs Office (GCO), in MY 2012/13, Vietnam exported about 1.43 MMT (all types of coffee products, including green bean coffee, roast and ground coffee, and instant coffee) valued at $3 billion. This is a drop of 11 percent in both volume and value from the previous marketing year 2011/12.

Given record production, Post revises the initial MY 2013/14 total green coffee export estimate up to 25 million bags, or 1.5 MMT, a year-on-year increase of about 7 percent due to high level of exportable supplies and limited storage capacity throughout the green coffee bean value chain. Despite falling prices domestically and internationally, Vietnamese coffee exports will remain strong in MY 2013/14, likely surpassing the previous marketing year.

Vietnam’s processed coffee products, roasted and ground, and instant coffee exports have been increasing in recent years. The MY 2013/14 forecast for processed coffee product exports (including roast and ground, and instant coffee) are estimated at about 645 thousand bags, or 39 TMT GBE.

In recent years, Russia, Hong Kong, South Korea has become important emerging export markets for Vietnam’s instant and roasted and ground coffee.

Vietnam exports to the United States totaled $515 million in MY2012/13, falling from $621 million the previous year. The overall decline can be attributed to a decrease in green coffee bean exports to the United States which fell from $570 million in MY 2011/12 to $458 million in MY 2012/13.


Vietnam continues to import small quantities of green coffee, as well as roasted and instant coffee, from neighboring countries, led by Laos. Post’s maintains its forecast for MY 2013/14 total coffee imports at 350 thousand bags GBE, down from MY 2012/13, due to record production levels limiting import needs.

According to available data from Vicofa, GCO, and GTA, Post revises the estimate for total green coffee imports for MY 2012/13 to 237 thousand bags, or 14.2 TMT, about a 20 percent increase from the level of the previous MY. Imports are mainly from Laos, Indonesia, China, Uganda, Cote d’Ivoire, and Brazil. Arabica imports from Indonesia more than doubled in MY 2012/13 to 3.3 TMT.

Post estimates MY2013/14 roast and ground coffee imports, and soluble coffee imports at 10 thousand bags (or 600 MT GBE), and 140 thousand bags (or 8.4 TMT GBE), respectively.


Export prices:

The average export price of Vietnam’s robusta coffee in MY 2012/13 was $1,919/MT (FOB HCMC), a drop of 3 percent from the previous MY ($1,984/MT), and a 10 percent decline from MY 2010/2011.

Although Vietnam has faced difficult economic times over the past two and half years, coffee growers and local exporters have done fairly well and have been relatively profitable over the past three years (export prices above $1,900/MT). However, the large estimated production in MY 2013/14 has already put downward pressure on prices, both domestically and internationally. As a result, Vietnam’s export prices have declined significantly since October 2013, and as of October 31, 2013 were $1,529/MT (FOB HCMC). It is reported that the price fell approximately $100/MT in a one week period from October 23 – 31, 2013, due to the drop in global market prices. This rapid drop in export and domestic prices has prompted Vicofa to seek MARD to allow a stockpiling program to stabilize prices. The Minister of MARD recently petitioned the National Assembly to permit such a program. As of the publication of this report GOV had not decided to implement a stockpiling program.

Domestic prices:

Vietnam’s average domestic coffee price for Robusta common ungraded coffee beans in MY2012/13 was VND 40,159/kg ($1.91) in Dak Lak province, and VND 39,917/kg ($1.90) in Lam Dong province, the largest coffee growing areas in Vietnam. This is a decrease of about 1 percent from the previous MY, and about a 7 percent drop from MY2010/11.

In March 2013, prices spiked in all four major growing provinces as the specter of the drought in the Central Highlands took hold. Prices reached VND 44,000-VND 45,000/kg before falling off in late March and April as rainfall increased and crop prospects improved. Local prices kept falling from May to October in line with the decline of export prices and international prices. Average local farm gate prices in Dak Lak and Lam Dong provinces in October 2013 were quoted at VND 34,636/kg ($1.65) and VND 34,220/kg, respectively, about a 5-6 percent drop from the previous month. It is reported that prices have continued to fall in growing regions, and as of October 31, 2013, local farm gate prices were quoted at VND 30,900/kg in Dak Lak Province.


Although there is no official data for coffee stocks available, MY 2012/13 ending stocks were estimated by local growers and exporters at about 7-8 percent of the MY 2012/13 crop. Traders, processors, farmers, and collectors are holding the stocks. Industry reports that farmers are holding higher stocks than in previous years due to favorable, low interest rates limiting the pressure they feel from financial institutions to repay loans with the proceeds of selling their old-year crop. GVN is currently considering implementing a stockpiling program to stabilize prices. As of the publication of this report, no decision was made to implement the program.

Post revises the MY 2013/14 ending stocks forecast to about 3.7 million 60-kg bags, or about 222 TMT GBE, as higher exportable supplies, lower international prices, and favorable interest rates will cause stocks to rise.


GOV Establishes Coffee Coordinating Board

On July 30, 2013, in response to requests from MARD’s Department of Crop Production (DCP), the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) and the Department of Personnel, the MARD Minister issued Decision 1729/QD-BNN-TCCB establishing Vietnam’s Coffee Coordinating Board (Coffee Board). The board is comprised of 50% public and 50% private sector, and includes farmers who have not been involved in the policy development process before. The Board is established to make policy suggestions and coordinate the design and implementation of sector policies. MARD Vice Minister Le Quoc Doanh was named the Chairman of the Coffee Board; Vice Chairmen include the Director of the Crop Production Department and the Director General of IPSARD. The Coffee Board’s members include representatives from MARD’s Planning Department, International Cooperation Department, Department of Processing and Trade in Agriculture, Forestry, Fisheries and Salt, VICOFA, officials from two main coffee growing provinces (Dak Lak and Lam Dong), domestic and foreign enterprises, and producers.

GOV Approved Extending Export Credit Terms for Coffee Exporters

In response to MARD’s proposal to the Prime Minister, the GOV recently issued Decree 133/2013/ND-CP, dated October 17, 2013, approving the extension of export credit terms for coffee enterprises from the current maximum of 12 months to the new maximum of 36 months to help ease the pressure of bad debts. Vicofa reported that bad debts of the local coffee industry have amounted to about VND 6.33 trillion during the recent economic downturn.

GOV Issues Value Added Tax Refund for Agricultural Exports Directive

In June 2013, the Ministry of Finance (MOF) issued Directive 7527/BTC-TCT, which informs exporters that all value added tax (VAT) refund claims for agricultural export products need to be withheld for verification. When it is verified by MOF that the sellers actually pay VAT, MOF would then refund the claim to the exporter. The 13 state owned enterprises, on the so-called ‘reliable exporter list’ are exempted from Directive 7527. According to foreign exporters with operations in Vietnam, Directive 7527 has led to them limiting their purchases in order to avoid purchasing from dealers and middleman who are involved in VAT scams. It has also led to difficulty in managing cash flows due to uncertainty of the duration of the verification process. During peak time, VAT refund claims would be up to several million U.S. dollars per month, per company, and are aggregately stuck with the tax authority until verification. Recently, local coffee exporters proposed that the GOV to remove the VAT for coffee entirely, as almost all coffee (95 percent) is exported.

Vicofa Proposes GOV Coffee Stockpiling Program to Stabilize Prices

On November 12, 2013, Vicofa received approval from MARD to submit a proposal to GOV to implement a stockpiling program of 300,000 MT or 5 million 60-kg bags of coffee beans during MY2013/14 to stabilize coffee prices, which are currently at a three year low. If achieved, a 300,000 MT stockpile would represent about a sixth of the 2013/14 crop. Vicofa’s proposal proposes that loans at preferential, low interest rates be extended to coffee exporters and dealers in U.S. dollars. The loan would stipulate that the coffee would be kept in the stockpile for six months. Vietnam last implemented a stockpiling program 3 years ago. GOV must now decide whether to implement the program.


Nestle Vietnam Launches New Instant Coffee Plant in Dong Nai

On July 9, 2013, the new Nescafé Tri An factory was inaugurated in the Amata Industrial Zone, Bien Hoa, Dong Nai. This new factory specializes in making instant coffee products to meet the growing consumer demand and local taste preferences for Nescafé products in the region. The Nestle Tri An plant belongs to the global Nescafe Plan, which was launched in Vietnam in 2011, and includes the company’s commitments to coffee farming, coffee processing, and consumption activities. Nestle set up its representative office in Vietnam in 1995 and has since grown to include five plants in the country with more than 2,000 staff nationwide at total investment of over US$450 million