One of the key outcomes of the Vietnam sector development project was a common agreement on the major areas of improvement that are needed to enhance the sustainability of the coffee sector in Vietnam. To help address some of the identified priorities, the DE Foundation formed a partnership with the Rabobank Foundation and the Dutch Ministry of Economic Affairs, Agriculture and Innovation (EL&I).
The Central Highlands project aims to help establish 3 cooperatives, 1 in each of the 3 main coffee producing provinces in Vietnam. This is expected to help farmers benefit from economies of scale. For instance, when buying fertiliser, which is typically one of the larger annual investments, a group of farmers may be able to buy directly from a factory, which cuts out the margin of the middleman. When selling coffee, a group of farmers than can offer a large volume of consistent quality can negotiate better prices from buyers. Taken together, all these seemingly small steps can add up to some serious margin improvements, 20-30% is not unheard of. Also in certification processes, a farmer group is important, as individual farms are too small to be certified cost-effectively. In this project we try to get farmers to take of that side of the business too. This will allow the group members to sell coffee to any buyer of certified coffee instead of only to the exporter that took the initiative to group them in the first place.
The current challenge is to address development of economies of scale by establishing business-oriented farmer organisations which can manage certification independently, offer certified and conventional coffee to any exporter, provide technical advice on farming practices to its members and move up in the value chain by offering processing and warehousing services.
Key activities for this project are to:
During project implementation it became clear that more effort was required in 2 of the 3 provinces before farmer organisations could be established. However, the first cooperative, new style is now operational in Lam Dong province. In Dak Lak and Gia Lai initially more input on community building wass taking place to increase social cohesion within communities that often consist of relatively recently arrived settlers and ethnic minorities but also there tentative steps are taken to establish cooperatives.
The Lam Vien cooperative in Lam Dong meanwhile is fairing quite well. It is conducting negotiations with local banks to obtain operational credit for its members. As part of the service provision component, the cooperative, with project support, negotiated a deal with fertiliser manufacturer Yara to obtain fertiliser directly from the factory, thereby cutting out the middlemen, ending up with better payment terms. Prospects look good with 80% of the coop membership keen to buy fertiliser in this way. The first crop has been sold collectively. Not a large amount but still 240Mt of green bean and prices were quite decent. This bodes well for next season when more farmers are expected to join.
Farmer Field Books are being kept by a large number of farmers, over 800 in total. Training on GAP on a Farmer 2 Farmer basis has been changed by incorporating a training division in each cooperative. This could open a modest additional revenue stream for the coop by offering trainings at a margin to non-members (and to members at cost).