Coffee trading floor should be set up in Vietnam Central Highlands for risk management: experts

A coffee trading floor should be set up soon to set price benchmarks and manage market risks, experts said Sunday at a workshop.

The workshop, organized by the Gia Lai Department of Industry and Trade in the Central Highlands province, focused on strategies to manage price risks as well as methods for buying and selling coffee on a commodity exchange.

According to the General Department of Customs, Vietnam exported one million tons of coffee in first half of this year, generating nearly $2.4 billion in revenue. It was the highest export value ever recorded in the first half of a year, the department said.

Bui Nguyen Anh Tuan, deputy director of the Domestic Market Department at the Ministry of Industry and Trade, noted that Vietnam was currently the second-largest coffee exporter in the world, shipping to 80 countries.

Despite its status as a coffee export powerhouse, the export price reference for Vietnam's coffee was heavily influenced by international markets, including the two major global exchanges in New York and London.

In this situation, Tuan emphasized the need to establish a domestic coffee exchange to reduce risks associated with price manipulation and provide farmers and businesses with reliable price references while ensuring market fairness.

He said creating and operating a commodity exchange would require collaboration not only from the agricultural sector but also from logistics, finance and warehousing industries.

Many challenges

Tran Van Binh, chairman and CEO of Saigon Invest Commodity Trading JSC, acknowledged that establishing a coffee exchange in Vietnam was an ambitious yet challenging proposal with great potential.

“The exchange would facilitate the trading of coffee futures contracts, where supply and demand can meet and prices are formed. Prices set on the exchange would serve as reference prices for the market. Coffee producers, exporters and importers could use the exchange to protect themselves against price fluctuations,” he said.

Binh also noted that the exchange would create a transparent and fair trading environment, enabling farmers to sell their products at reasonable and stable prices, which would increase their income.

The exchange would also attract both domestic and foreign investors, providing opportunities for the growth of coffee processing and export businesses, he said

However, Binh pointed out several risks involved in launching a trading floor, including legal issues, fluctuating market prices, technological challenges and financial risks. He emphasized the need for preventive solutions and cooperation with banks, insurance companies and financial institutions to mitigate these risks.

Despite the risks, a coffee trading floor in Gia Lai would make full use of the province’s coffee-growing area, connecting the Central Highlands provinces that account for over 92% of the country’s total coffee cultivation. This would help improve local livelihoods and contribute to the region’s socioeconomic development, he reiterated.

Nguyen Huynh Phu Lam, director of Classic Gia Lai Coffee JSC, urged a careful assessment of potential risks and the possibility of failure when launching a coffee trading floor.

“The failure of the Buon Ma Thuot coffee trading floor in Dak Lak province serves as a lesson. A trading floor is essentially a marketplace that attracts both buyers and sellers, so it’s essential to clearly define the benefits and risks for all participants to avoid repeating the mistakes of the past,” he said.

Disbanded after 10 years

In 2018, the Buon Ma Thuot Coffee Trading Center (BCEC), located in Dak Lak province was officially disbanded after 10 years of operation.

Founded in 2008 by the Dak Lak provincial People’s Committee, BCEC was established with the goal of increasing the value of coffee. However, despite initial enthusiasm, many members who registered did not contribute or contributed very little capital, leading to significant challenges in the center's operations.