New coffee exchange on the boil

The centre will give local traders valuable contact with global markets

The Buon Ma Thuot Coffee Exchange Centre, located in Dak Lak province, which is home to over 70 per cent of Vietnam’s total coffee area, will open in August and have direct informational connection with London International Financial Futures and Options Exchange and New York Board of Trade.

“The centre will mark a significant milestone in the history of Vietnam’s coffee industry because it will enable producers and traders to get exact information in the world’s two big exchange centres, where a great deal of Vietnam’s coffee is traded,” said Bach Thanh Tuan, director of Vietnam Superintendence and Inspection Company of Coffee and Agricultural Products for Export and Import (CafeControl).

“It will help farmers physically meet and sign trading contracts with transparency and ensured product quality,” he added. All types of locally produced coffee will be openly traded with spot and forward transactions. Domestic and foreign coffee export-import organisations, farms, farm owners, households, coffee producing and consuming organisations are eligible to participate in transactions.

Only the centre’s members have the right to directly execute transactions at the centre, while non-member organisations can execute transactions via members. Techcombank and CafeControl will be the centre’s trust organisations, of which the former will be in charge of offering payment and credit services for the centre’s trading activities and the latter will be responsible for examining coffee quality, then helping determine the value of product in contracts.

Ly Thanh Tung, director of Dak Lak province’s Trade and Tourism Department, said local coffee producers often sold product through intermediaries at low prices because they did not have information about the global coffee market. Meanwhile, local exporters failed to accurately forecast the market demand and the trends of price fluctuations.

For example, the coffee price in 1994 was roughly $4,000 per tonne and lowered to $500 per tonne during 2001-2002. But in March this year, it reached $2,750 per tonne. He also said traders often failed to grasp a crop’s true size and price.

“Sufficient information about the coffee market locally and globally provided from the centre will help traders and producers predict price fluctuations and shun possible risks in prices,” he said.

“Besides providing credit support and consultancy services for farmers, the centre will also provide information about foreign legal systems and policies, international practices and bilateral agreements between nations, as well as fluctuations in the exchange rate,” he said.

Vietnam is the world’s second largest coffee exporter and shipped 1.2 million tonnes of coffee with a turnover of $1.82 billion last year. It is expected that the nation will export $1.1 million tonnes of the product, earning a turnover of $1.8 billion, this year.