HO CHI MINH CITY (BLOOMBERG) - Coffee growers in top producer Vietnam are planting more profitable crops such as avocados, black pepper and durians, which is helping them cope with the soaring fertiliser and fuel costs caused by the war in Ukraine.
Even with the extra income from these additional crops, farmers are still having to cut back investment in their coffee trees, which may lead to a 10 per cent drop in production next season from a year earlier, said Mr Nguyen Nam Hai, the new chairman of the Vietnam Coffee and Cocoa Association.
The country buys large amounts of fertiliser from Ukraine, Russia and Belarus, and farmers are not profiting much from market prices, even though they are higher than a year ago, because of the increased costs, he said in an interview.
Vietnam is the world's biggest grower of the robusta variety used in instant drinks and espressos. The country is likely to account for almost a fifth of all the coffee grown in the world in 2021-22, with output of more than 31 million bags of 60kg each, according to the US Department of Agriculture.
The war has had almost no impact on shipments because Russia and Ukraine are not major importers of the country's coffee, and sales to the key European Union market have been maintained, Mr Hai said, adding that he sees exports this year staying around the same level as last year.
Green coffee beans still dominate exports, and the country's processed products struggle to find a way onto the world market because customers are already used to established brands and to Nestle products, said Mr Hai.
The goal is to have processed products represent as much as 25 per cent of coffee export revenue in the next five years from less than 10 per cent at present, he added, while local consumption is expected to double to as high as 12 per cent of total sales.
Other priorities are to encourage local growers to establish more cooperatives and partner with exporters to form larger farms, which will help standardise cultivation processes and increase usage of high-yield varieties, Mr Hai said, adding he also aimed to replant ageing trees and increase irrigation to combat climate change.
