A large number of the coffee farmers in Vietnam are dependent on the local collectors for processing coffee and for credit. They borrow money from the collectors with high interest rates (at 2.-3.5% per month) not only for inputs but often also for family expenses. While generally such interest rates strongly reduce farm income, in the worst cases they lead to farmers having to sell their coffee at low prices when their coffee cherries are still unripe. Because of such practices, various farmers have fallen in a debt trap, where they need to borrow to survive and work hard just to be able to pay of their debts.
Joining Lam Vien Coffee Cooperative, the members are hoping that cooperation will help them to make the best profits from their coffee farm. The cooperative therefore aims to support its members through buying inputs and selling products in bulk to get better prices, to ensure quality of both inputs and outputs and to provide credit at cheaper rates than middlemen. Having been operational for more than one year, Lam Vien is on its way to realize its members’ ambition though there are still a lot of difficulties to overcome.
After the establishment, 148 farmers committed joining the cooperative and contributing the charter capital. However, until the general meeting to sign economic contract between members and the cooperative, only 98 members (with total acreage of 197ha) remain, agreeing to consign 60% of their production in the cooperative. Even then, some members are still doubtful about the capacity of the cooperative management team. Some farmers decided to pay 2,000 VND/kg for the operational costs rather than consigning their coffee because of this reason.
During this first crop, the total volume collected was 215 tons, including 102 tons in consignment. The collected volume was not up to the 360 tons that was planned. Apart from farmers being cautious, “they are familiar with the free market and for many of them, the cooperative is too demanding in terms of quality. However, we want to build up a good reputation for the cooperative, so we have to be strict on the quality requirements of the coffee collected”, according to Mr. Hong Xuong Phong, Chairman of the Board of Directors.
The model is new in Vietnam with strict requirements to ensure a transparent and low risk business development by the cooperative, but farmers still have negative perceptions about the ‘old style’ cooperatives in Vietnam. It will require a lot of time, effort and proof of success to overcome these perceptions. However, Lam Vien has already successfully sold 149 tons of green bean coffee to an international trader in the region (ACOM) at a good price. A visible success is that the cooperative sold its coffee at a significant higher price than what a farmer can get if he sells the coffee at the beginning of the harvest as usual (40,400VND/kg compared to 36,000VND/kg – equal to 1.94USD/kg and 1.72USD/kg respectively). “This is really encouraging to our members” – said Mr. Phong.
In its learning process, this success is a nice signal for the members of Lam Vien to go ahead.