Vietnam should expand Arabica coffee with care, industry says
Vietnam, the world's largest producer of Robusta coffee, must approach any expansion into Arabica beans with care because of higher costs and the need for better processing, producers and analysts said.
Robusta beans are a bitter-tasting variety used by food and beverage companies such as Sara Lee Corp. and Nestle SA. Milder Arabica beans are used by companies such as Starbucks Corp.
The Southeast Asian country has been focusing on quality rather than quantity since becoming the world's second-largest coffee exporter in 2001. It cut coffee acreage to about 450,000 hectares by end-2003 from 535,000 hectares in 2001 to concentrate on quality, the country's coffee association said.
``There is growth potential for Arabica in Vietnam; it all depends on whether we have suitable land,'' said Do Van Nam, general director of the Hanoi-based Vietnam National Coffee Corp., which controls small coffee companies, at a conference in Ho Chi Minh City that ended Nov. 30.
``We need to aim for stability in supply, lower costs of production and improving the processing of the beans,'' he said. ``You can't treat Arabica the same way you treat Robusta,'' he said, adding investment in Arabica output is 20 to 30 percent more than Robusta.
Arabica beans fetch double the price of Robusta beans.
Vietnam currently has between 22,000 to 25,000 hectares of land for Arabica production, said Nam, adding Vietnam National Coffee wants the country to at least double the figure by 2010.
Ambitious
Van Thanh Huy, chairman of the Vietnam Coffee and Cocoa Association or Vicofa, is more ambitious, saying on Nov. 29 that the industry group wants to see the figure as high as 100,000 hectares by 2010.
Arabica beans need a cooler climate, and Vietnam's is conducive to Arabica in northern highland areas, such as Dien Bien and Son La provinces, Vicofa Vice-Chairman Doan Trieu Nhan told a conference in Brazil in September.
``Ineffective Robusta coffee production should be reduced, and Arabica coffee output expanded in suitable areas,'' Nhan said. ``Vietnam's coffee industry should only supply a reasonable amount of high-quality coffee to the market.''
Robusta makes up 98 percent of Vietnam's overall output, used mainly in blends and instant coffees. Vietnam came in for industry criticism when it contributed to a 1990s Robusta glut which only eased this decade.
Output
There are conflicting figures on Vietnam's coffee output for the year ended September. The International Coffee Organization estimates it at 750,000 tons. Vicofa has revised its figure to 804,000 tons from an original estimate of 750,000 tons. The U.S. Department of Agriculture has an estimate of 870,000 tons, according to a Nov. 15 report.
Vietnam produced about 18,000 tons of Arabica coffee in the crop year ended Sept. 30, Huy of the Vietnam Coffee and Cocoa Association, told journalists Nov. 29 at the Ho Chi Minh City conference.
Vietnam may produce 21,000 tons of Arabica in the year to September 2006 with more acreage, according to an estimate by Nguyen Van An, director of Arabica exporter Thai Hoa Co. Ltd.
Setting aside 100,000 hectares with a target of between 100,000 and 150,000 tons of Arabica yearly can bring about supply stability that will boost Vietnam's standing in the Arabica export market, he said. Brazil is the world's largest producer of Arabica beans.
Arabica coffee is normally drunk on its own and recognized for its distinct taste and aroma, depending on the origin. Arabica beans are often branded to fetch higher prices.
Futures
Robusta futures for January delivery closed at $1,066 a ton in London yesterday, or about 48.5 cents a pound, up 25 percent since the year started. Arabica futures for March delivery closed at 96.45 cents a pound on the New York Board of Trade yesterday, down 7 percent since the start of the year.
``Vietnam needs more fertilizers and certainly more irrigation than any other country of origin,'' said Ana Vohringer, a senior coffee analyst at Armajaro Coffee Ltd., a unit of the U.K.'s Armajaro Holdings Ltd., which supplies, stores and ships cocoa and coffee beans for companies such as Cadbury Schweppes Plc, Mars Inc. and Kraft Foods Inc.
``Right now it's a very good producer of Robusta, and while it's always good to add value, the conditions now are not right for farmers to take up Arabica,'' she said. ``Quality is the key in Arabica.''
By Claire Leow & Jason Folkmanis - Bloomberg - December 1, 2005.
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