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| Speculation funds cause bad effect to coffee market |
| 02/Jul/2009 Intellasia | Thoi Bao Kinh Te Vietnam |
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| 2 Jul, 2009 - 11:02:18 AM |
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Vietnam's coffee export price is now at the lowest levels in the past three years due to speculative activities.
Vietnamese Coffee and Cocoa Association (VICOFA) have called for an extraordinary meeting among coffee producers and exporters within this week to find the solutions.
Luong Van Tu, Vicofa's chair stated that many Vietnamese enterprises became the victims of those speculation funds due to unprofessional business operation and lack of integration.
Vietnam Economic Times met and interviewed Tu recently. Here are some of the excerpts of the interview.
What do you think about the current world coffee market situation?
The world market is going through a difficult phase. The coffee price has slumped to the lowest level. Within only two weeks, the coffee price at London market slid considerably by $240 or about 4.3 million dong per tonne. The listed coffee prices on June 13 were $1,525 per tonne for July delivery and $1,530 per tonne for September delivery, while that of June 26 were $1,288 and $1,313 respectively.
Vietnam's coffee export price stayed at the lowest in the past three months with $1,195 per tonne FOB.
Is it because supplies exceed demands?
I am sure that the falling price now is because of the speculation that is causing market fluctuations. Those speculators have done it with a purpose to monopolise the market. During the previous month, they spread rumours that the coffee price would increase dramatically, that made Vietnamese enterprises rush to speculate in coffee. Many coffee traders got short-time loans from banks to purchase coffee and are now under pressure of selling to pay the due-time loans.
The fact that in June, the speculators stopped buying coffee with the purpose of lowering the price, in addition to their rumours that the coffee price would tend to decline in the late months of this year has caused many domestic coffee traders to sell. These traders earlier had hoarded the commodity.
Many domestic coffee traders have suffered per tonne loss of 3 to 4 million dong, while some lost 100-500 million dong this time.
As the second largest coffee exporting country in the world, why was Vietnam manipulated by the foreign speculators like that?
It wasn't the first time that we have suffered from this. VICOFA had warned many times but the domestic enterprises haven't learned any lessons from the past. October last year had seen a similar situation.
Vietnamese enterprises are still unprofessional and lack integration. They often update information on the market on their own, but not all of them know how to check the information. It's the disadvantage that the foreign speculators focus on developing and controlling. They continuously give inaccurate predicts and forecast to cheat the Vietnamese enterprises.
In addition, many enterprises now suffer from loss due to their storing activities. Many of them signed the contracts for September delivery but now haven't purchased coffee while the price slumped at the very low and most farmers stopped to sell their products.
At present, many domestic coffee exporters are in difficult situation because many contracts signed previously were for the delivery time but now they have nothing to deliver. So as not to be sue of breaking the contracts because of their failure to deliver the goods in time, many enterprises have to change the delivery time from July to September with the additional charge of $35 per tonne, and $50 per tonne if changing delivery time to November.
What can the domestic coffee exporters do to overcome the current difficulties?
Vietnamese coffee exporters now must stop all their current selling or purchasing deals, as well as stop signing export contracts. However, it's hard to do this because Vietnamese enterprises lack cooperation with each other.
Vicofa advises Vietnamese enterprises to be cautious in identifying their partners so that they do not fall in the trap in of speculators. In addition, the association has suggested the enterprises not to sign export contract with distant partners while they don't have available sources of products. The coffee traders are encouraged to cooperate with each other in sharing information about the price problems. Those enterprises that face problematic situation now need to find flexible solutions in time with the main purpose of getting rid of loss.
Previously, the government had purchased and stored coffee to regulate the market. However, due to suffering loss, the government has stopped this method for many years. The association is asking the government to purchase and hoard coffee to avoid risks.
Vicofa plans to hold an extraordinary meeting with the domestic enterprises to discuss solutions to deal with the current difficulties now.
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