Influence of the global coffee economy on Vietnam and Vietnamese coffee growers

The combination of Vietnam's economic reforms since the mid-1980s (see Fforde and Vylder 1996), availability of natural resources in the uplands, and the ability to change residence status (Hardy 2003; GSO 2005) has resulted in a rapid influx of migrant laborers and farmers, precipitating a considerable rise in coffee production in the Central Highland region. Thus within a decade of entering the world coffee market, Vietnam has become the second largest producer of Robusta beans in the world (Figure 1A). Coffee farmers in Vietnam face a number of challenges. Although the world's coffee consumption is rising, coffee prices have experienced a long-term decline over the past 2 decades. This results in highly volatile world coffee prices where cycles of boom and bust may last over 5 years or longer. Vietnam's rapid entry into the world coffee marketing chain as a major producer has contributed to the fall of real coffee prices to a 70-year low, resulting in a steady decline of the price of coffee beans paid to growers in Vietnam up until 2003 (Figure 1B; Greenfield 2002; Oxfam 2002).

FIGURES 1A AND 1B

A) Vietnam's coffee production and export, 1982–2003. Production estimates: provided by members of the International Coffee Organization (ICO) for the current crop year and revised on a quarterly basis. After the end of the crop year, estimates are replaced by derived production. In the absence of estimates provided by ICO members, alternative sources are used (ICO 2006). B) Average price paid to Vietnamese growers in US cents per lb of Robusta beans, 1982–2003. (Source: ICO 2006)

For Vietnamese coffee growers, these global factors are exacerbated because there is no formal marketing board for coffee and the majority of coffee beans grown are of the Robusta variety, which has limited price differentiation potential due to its inferior quality when compared to Arabica beans. Growers have only limited information about the value of their crop and hence very little influence on the prices they are paid by middlemen (CRP 2000; de Fontenay and Leung 2002). The poor quality of soils and the hydrogeography of the Central Highlands mean that coffee plantations require high inputs of fertilizer and need to be irrigated (D'haeze et al 2005).

Economic risks and their management

Increased competition over agricultural land in the Central Highlands has led to steadily rising costs for arable land. Severe regional droughts in 1998 and 2001 have added further financial stress for coffee farmers (Adger et al 2001). Indeed, in order to establish a plantation, the majority of migrant coffee farmers interviewed had taken loans from state banks, private lenders, and family members prior to the coffee crisis in 1999. The drop in international coffee prices, however, meant that they were unable to recoup their initial investments and subsequently were unable to service their debts (see also Lindskog et al 2005; Dang and Shively 2007).

The fluctuations in coffee prices may put severe stress on households who overspecialize in one cash crop. While there are a number of macroeconomic tools to manage the impacts of commodity price fluctuations for small farmers, the best way is to diversify their crop production, thus providing a natural hedge against commodity price fluctuations (de Fontenay and Leung 2002). Interviews with migrants showed that many have taken the more vulnerable route of focusing their production on cash crop farming, making diversification more difficult, especially when other cash crop markets are not very well developed or suffering from a similar fate as coffee. From December 1999 through February 2001, coffee prices fell sharply (see Figure 1B) and migrants interviewed in 2000 and 2001 responded in various ways (Table 1). Those who were unwilling to sell their beans in the hope of price improvement sought additional loans to be able to keep their farms productive (see also Giovannucci et al 2004). Others responded to the crisis by planting different cash and subsistence crops, whereas those who could not afford to keep farming or who had better opportunities elsewhere were considering returning home or migrating to other destinations in search of non-farm employment. In 2001, during repeated visits to the case study sites, we observed that new migrants had moved into houses vacated by former coffee farmers who had moved to urban areas such Ho Chi Minh City.

TABLE 1

Sources of risk as experienced by migrant coffee growers. (Source: Migrant interviews, 2000 and 2001)

The experience of Hong, a former seafarer from Giao Thuy District who moved to the Central Highland province of Dak Lak in 1995 to farm coffee, is illustrative of a commonly shared experience. Hong intended to diversify his income through farming coffee in order to pay back existing debts. However, the investments in his coffee farm meant he had to borrow more money from his nephews, who also worked in Dak Lak Province. By 1999, low coffee prices prevented Hong from recovering his investments. He therefore decided to invest in pepper. Hong's own words describe this dilemma:

Most migrants aim to buy a piece of land (1–2 ha on average) as soon as they arrive, yet the majority act like Hong, leaving the decision of whether to settle permanently in the destination until a later date.

Another example is Thi and her family, who have been circling between their home community in Giao Thuy District and their farm in Dak Lak Province since 1993, when her parents had claimed land there. Her family's flexibility about whether to live in the northern lowlands or the highlands illustrates the flexibility with which migrant families manage the risks of upland farming. Thi explained to us:

This circling between the migrant's origin and destination may last years or even decades and may fulfill 2 important functions. On the one hand, it allows the household to maximize the return on its efforts by diversifying its assets, especially the return to labor power. On the other hand, it is an important risk management strategy in the face of changing upland economy.

The qualitative data collected for this study also highlight important functions of migrant network connections to family and friends, both at home and at the destination. Household members who remain in the place of origin—the spouse, father, or a sibling—often join the migrant during times of high labor requirements (usually during periods of soil preparation and harvesting). Similarly, financial capital tends to flow from the origin household to migrants for a number of years. Parents and spouses of migrants take out loans using their land and house in the Red River Delta as collateral in the hope that successful highland farming will benefit all members of the household in future.

This support by migrant networks is important in light of in-migrants' limited access to public services and support. The majority of migrants interviewed were still registered at their place of birth and had only temporary residency in their destination. Vietnam's household registration system (ho khau) requires that public services such as health care, schools, and pensions only be accessed in the place of permanent residence and therefore excludes many migrants from accessing these services in the destination (Hardy 2001; GSO 2006). The many uncertainties with respect to globally traded cash crops mean that it is in many in-migrants' interest to stay registered in their home area to be able to further draw on resources outside the highland economy.

Within the community of farmers in the destination areas, in-migrants also tend to rely primarily on those they knew before they migrated. On the one hand this reduces the risk of relying too heavily on strangers and traders in gaining access to land and knowledge about both farming techniques and prices for coffee beans; on the other, the fact that migrants tend to relate mostly to their “hometown” friends in the destination may limit their access to more relevant information and social networks outside their peer group (Winkels 2005).

Environmental risks and their management

Strongly linked to farming activities in Vietnam's uplands are negative impacts on the region's natural resources. Between 1943 and 1995 the area of Dak Lak, Kon Tum, Gia Lai, and Lam Dong provinces, then officially considered part of the Central Highlands, experienced a decline of primary forest from 93% to 57%, ie from around 51,000 ha to 31,000 ha (Vo et al 1998). At the same time, the area planted with coffee trees in Vietnam rose from 22,500 ha in 1980 to 530,000 ha in 2000, three-quarters of which are cultivated in the Central Highlands (Giovannucci et al 2004). Pettenella (2001) outlines the complex combination of factors that are responsible for forest decline in Vietnam's uplands: population pressure due to migration, reduced fallow periods, privatization of state forest enterprises (providing a stimulus for commercial logging), road building, hydroelectric developments, and Vietnam's increased integration into international markets. The influence of national and local governments in the unfolding environmental degradation of Vietnam's highlands, as well as unclear definitions of property rights on forest lands, are highlighted by Sikor (2002, 2004).

The result of this widespread reduction of forest resources has many negative implications for ecosystem health and biodiversity as well as for livelihoods that depend directly on forest resources (Rambo and Jamieson 2003). Deforestation has also been linked to the increasing number of localized floods and droughts in the Central Highlands (Adger et al 2001). The response to these shocks differed widely among those affected in the migrant group interviewed, largely depending on their asset base and level of debt. Some of those affected started to migrate to other areas to work as farm laborers in order to make ends meet. Others had sufficient capital to rebuild and improve their houses and to continue farming. The study design allowed us only to meet in-migrants who were present at that moment in time, thus making it difficult to achieve a first-hand assessment of whether many migrant farmers moved away or returned home in response to flooding events or droughts.

Soil erosion and the depletion of groundwater resources are both serious problems in the Central Highlands, and access to good-quality land is becoming more difficult according to migrants interviewed. Smallholder coffee farmers often lack adequate support and knowledge to prevent these problems and end up paying with decreased yields and higher costs for fertilizer and irrigation (Beckman 2001; Giovannucci et al 2004). As illustrated above, migrants respond to the unpredictable nature of coffee farming in such a fragile environment by not changing their residence status permanently. This short-term view and temporary nature of living in the destination provides migrants with a certain livelihood advantage, as they are able to return home once they experience diminishing returns. However, this attitude also means that migrants are less willing to invest in sustainable techniques necessary to prevent soil loss and ensure water is abstracted at sustainable levels.

Sociopolitical risks and their management

As a result of the rapid in-migration of lowland Vietnamese—Kinh, ie “people from the capital,” who are in a majority with 86% among of Vietnam's 54 ethnic groups—as well as migrants from the northern mountain regions (belonging to a range of other ethnic minority groups), the ethnic makeup of the Central Highland population has changed dramatically in the past 4 decades. Until the French occupation in the early 19th century, the indigenous population of the Central Highlands was dominated by the Ede, Bana and Jarai ethnic minorities, who made up 95% of its population (Chu 1995). Yet, by 1999, at least 65% of the highland population belonged to the Kinh ethnic group (Rambo and Jamieson 2003, p 139).

The competition for resources and administrative bias towards Kinh leave indigenous ethnic minorities in the highlands to search for livelihoods in more marginal areas, where they are more exposed to climatic variations and poorer soils (Rambo and Jamieson 2003; Zingerli 2003). As a result of these pressures, the uplands are witnessing increasing social tensions. Since 2001, for example, several demonstrations by ethnic minority groups were held in the Central Highland provinces of Dak Lak and Gia Lai against discriminatory state policies that tend to favor Kinh in-migrants in resource allocation (McElwee 2001; Human Rights Watch 2002).

Interviews with migrant settlers in the Central Highland region show that social tensions also exist amongst in-migrants in newly established highland communities. The diverse ethnic, cultural, and economic backgrounds of in-migrants settling in these communities mean they are less likely to develop a sense of social solidarity and trust (Sandefur and Laumann 1998). This sense of insecurity for migrant coffee farmers is exacerbated by resource pressures, remoteness, insufficient investments by local and national governments, protracted legal recognition of land titles and community status, and the above-mentioned restrictions on access to public services by in-migrants who have not been registered (GSO 2006). It is therefore not surprising that migrants manage these uncertainties by leaving their children at home to be looked after by their grandparents. As labor requirements on coffee farms often require both husband and wife to migrate together, a number of interviewees left their children of school age with their grandparents.

In their absence, migrants also rely on those who stay behind to look after their allocated plots of land in their home area, which would otherwise be reallocated by district authorities. However, when migrants draw on resources through their networks, for example by asking other household members to provide monetary support or help by looking after children and/or land, this can also have detrimental effects on the wellbeing and security of other family members who remain at home. The loss of any investment in migrant farming activities may therefore not only leave the migrant struggling, but also lower the capability of the remaining family to respond to risks. To illustrate this, it is worth quoting at length an account of Mr Tam's experience.

Mr Tam is 61 years old and has 3 children. He has 2 sons who work in the Central Highlands as migrant farmers, and one daughter who lives with an aunt in Ho Chi Minh City in order to work and be treated for a chronic disease, using much of the household's savings to pay for medical treatments. In 1997, one of Mr Tam's sons purchased half a hectare of land in the uplands to plant coffee and pepper. In order to be able to afford the investments for his plantation, Mr Tam took out loans for his son. However, as perennial crops take a number of years to mature and because of the subsequent price collapse of coffee, Mr Tam is unsure whether his son will be able to pay him back. In the meantime, he has had to sell his own assets to pay back the loan:

Mr Tam and his wife remain in the Red River Delta and look after their children's land. Yet, they find it difficult to plant these fields because they lack labor power. They can only partially draw on community resources, as they are unable to repay any obligations:

While Mr Tam and his wife may benefit from the increased land resources at their disposal, they are actually unable to do so as they lack the necessary labor power. Moreover, because they have more land to farm than they are able to, they cannot exchange labor with others, thus reducing their own stock of social obligations—which they could normally call upon when they require the help of their neighbors. Therefore, while providing insurance for his son, keeping land for his son becomes a drain on Mr Tam's household resources. With the uncertainty related to export markets in the Central Highlands, it is unclear whether Mr Tam's children will profit from their investments. What is likely, however, is that Mr Tam's livelihood has become less secure with the migration of his children.