This is an interview with Hao Qiu, the Founder of Fair Farm Vietnam. It looks at how global factors, including Brazil’s crop outlook and Middle East disruptions, are influencing coffee prices through shifting demand and higher logistics costs.
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BARNES: Is it okay for me to record?
QIU: Yeah, sure.
Sure.
BARNES: Fantastic. Okay. So, I guess firstly, just tell me a little bit about Fair Farm. Like, what is it that you guys do out in Plekiu?
QIU: Yeah, sure. Sure. Like, but before that, could you introduce yourself a little bit so I just know the background, so I know more like how I should respond, because, are you like from a magazine, a newspaper, are you doing the research on uni, like at the university?
BARNES: Sorry, man. Okay, so I write a website. It’s called the-shiv. Basically, it’s just for, like, foreign investors that are sort of doing business in Southeast Asia. Mainly Vietnam. So yeah, that’s basically who it’s for, just sort of looking at —
QIU: All right. Okay. Yeah. Cool. Cool. So yeah, I can explain to you what we’re doing.
BARNES: Sorry.
QIU: So my name is how I’m actually born and raised in Germany, but I live now in Vietnam since 11 years, and since four years I’m fully focused on Fair Farm.
So we invested into the farm.
We have 12 hectares, and we started with durian but then switched really quickly over to coffee, and then from commodity coffee we switched over to specialty coffee in the last two years.
And the main reason is because commodity coffee, as the word already says, it’s a commodity which is internationally traded and has the London price, and we are then depending on the London price.
So, which means every day from Monday to Friday, you can look up the price of robusta.
So Vietnam is producing 95% Robusta, 5% Arabica.
BARNES: Sure.
QIU: And most of the coffee is actually commodity coffee.
I don’t know, do you familiar with the words commodity and the quality differences?
BARNES: Yes.
QIU: So we realised quickly the margin in commodity is really low, and for example, in the beginning of the season the price was at 1225,000 Vietnam dong per kilo, and it dropped recently down to 80 something.
But when we are in the season of coffee harvest and production, we buy in from the neighbours for that price, which means we have our cost, and we calculate with that price.
So when the price is dropping, they do minus, full stop, like yeah that’s that’s what happened, and even though the quality didn’t went down, and I think that’s that’s one of the main issues, like we know exactly as producers like us, we do processing, we do farming, but also processing, we also buy in from other farmers, we know the price, the official price we buy in for x amount of per kilo as cherries.
We going to process it. We dry it, and in the end, we have the raw greens, and we know our costs.
So that’s why a commodity coffee is for us so ridiculous, because it went down in value even though it’s still the same product.
BARNES: Sure.
QIU: Yeah. Yeah. And we could store the green beans up to one and a half years in the right conditions. So that’s why a lot of people are holding back the green beans in their storage if they are not in need of the money.
So whoever is now releasing coffee from their storage, they are doing minus compared to the beginning of the season.
BARNES: Sure. And so my understanding is a lot of the price decline recently is because of expectations of a big crop in Brazil. Is that correct?
QIU: Yes. So there are two different things, like the expectation of Brazil. We had two years ago the highest price ever because Brazil had a missed harvest.
So they had the big draw, and that’s why the prices went up — I think 145,000 was like the record price, and now we’re lying at 82-84,000 Vietnam dong.
Another part is like the Iran War with the Hormuz, the transport costs, they were rising, and also the transport timing.
So usually from here, for example, to Hamburg, they calculate with four weeks.
So they said they extended it up to six weeks.
Which means it makes it even more complicated to sell roasted beans.
That’s a big thing.
So with specialty coffee, for example, we say after roasting, six months you should consume it.
If the transport and the logistics takes already six to eight weeks, it makes it difficult to sell these products.
BARNES: Right. So it’s more the time that’s impacting it than the cost necessarily?
QIU: Both because now that the cost went up and the time is expanding, a lot of the roasteries, they say, we already signed our contracts with our clients with the fixed price, now the transport cost went up and the timing, which means our profit is going to go go down, because we cannot ask more from our clients because we have fixed contracts.
So they rather say, in the hope that the Hormuz will open up again, we will not place the orders now, and the London price is related to the orders they were placed in.
BARNES: Right. Yeah.
QIU: Sorry, they’re holding.
Yeah. Yeah. So they’re holding these back.
So but on a certain point, they have to place the orders, because if this crisis is going to stretch even longer, on a certain point they have to fulfill their contracts with their clients.
So that’s why we also expect the prices going up a little bit more.
But if it stretches too much and we hit Brazilian harvest season, so it will probably balance itself, in which is at the moment happening.
So for sure we cannot predict everything, but that’s what we what I kind of personally analyze is like okay this is now get stuck at 84 because Brazil is getting in, even though we can start exporting now because of the ceasefire.
BARNES: Right, so just I just want to make sure that I’m clear on what you’re saying. Right, you’re saying that people are holding off on buying coffee, therefore the price is falling because there is less demand, and they’re waiting until something happens in in the Middle East or hoping that it that it ends, and presumably because they want to sign another fixed contract, but obviously you don’t want to sign it now when your shipping costs are really high. Is that correct?
QIU: Actually they already have the fixed contract, so they signed them already a year ago.
So now they have to fulfill it.
But some of them they still have coffee in their storage, or they can postpone their fulfilment contract, but there is a limited time.
There’s like okay the deadline, let’s say in two months.
Is that so I have to place the order now, but if I can still stretch it maybe I should stretch it now because the transport costs are too high.
Yes.
BARNES: Yeah. Okay. Okay. So, the end consumer pays those transport costs, right?
QIU: The buyer not if not if the they have the fixed contracts.
So, if the roastery normally they sign a contract for a year, so before the season starts.
So, let’s say I’m the roaster, you have the coffee shop.
So, I sign a contract with you with the fixed price.
So, if the cost of the transport goes up, I have to pay it, not you, right?
My profit goes down, for you it still stays the same.
And then for the next season, I realize that price doesn’t fit anymore.
I will raise the prices.
You have to raise your prices then as well.
BARNES: Yeah. Yeah. Okay. Interesting. And so, I mean, you guys, you’re working on fixed contracts, and like you said, your your focus is specialty coffee, right, as opposed to —
QIU: Yes. So that’s why it we are not related, we’re not directly bound and affected to the the war, only a little bit because of the transport, because we decide ourself how much worth our coffee is.
So we are not making our price related to the London commodity price.
So we produce our coffee.
We say look this got is this standard of quality. We have 83 points at the competition. We are asking now for 200,000 Vietnam dong per kilo. We can negotiate a little bit if you take a higher amount, and we offer them the roasteries.
Look, we can help you with logistics.
At the moment this is the price.
If you agree on it, fine.
If not, we keep the coffee.
Yeah.
BARNES: Okay. And so what about like more local farmers that are more focused —
QIU: They all. Yeah, they all do commodity.
They all do commodity.
BARNES: And how are they sort of coping with — ?
QIU: They are screwed.
They’re.
Yeah.
To be honest, they they that’s that’s the truth.
Like I mean some are.
So the people actually who were in need of money in the beginning of the season, they’re laughing now.
They’re like, “All right, I I sold it at 120 to 125.”
And the people who are holding in the hope that it will go up from 125 to 145, they’re screwed now because now it’s only 82-84,000.
And then you have the people, they still have the coffee from the season before. So now we have the coffee of 25-26, and there’s still people from 24-25.
They’re still holding on that coffee because, yeah, it was so high and then it slowly went down, down and further.
So they don’t want to sell because they know I bought it maybe for 130, if I sell it now for 84, I have a big loss.
BARNES: Yeah. Yeah. It’s a big it’s a big hit. Hey, I wonder if like fertilizer prices then I was looking at your website. I think yours is all organic. Is that — ?
QIU: We do sustainability and regenerative and with fair trade practices.
So we still use partly chemical fertilizers, mainly to keep our farm, our orchard in sync, because we don’t want the trees, especially our durian trees and fruit trees, to be out of sync.
So the worst thing what can happen is kind of if one tree already has fruits ready to harvest and the other tree is in flower season.
So that’s why we use some chemical fertilizers, phosphorus, to keep them in sync.
But the fertilizer, that’s a huge thing issue now.
So the oil gas prices went up.
Fertilizer prices, chemical fertilizer prices, went up by 30 to 40%.
Which also means farmers, their production cost is going to go up.
Now two options.
First, the farmers earn less because they signed the contracts already.
Same problem with the groceries, and they earn less or make a minus because they have to fulfill their contracts.
Option two is the product prices are going up.
So that’s why we are working now since beginning of the year on the new sustainable program.
So we try to reduce the chemical fertilizers and replace them with organic fertilizer in a more sustainable way in combination with black soldier flies, azolas, like cover crops who are living in symbiosis with some fungi and bacteria to pull the nutrients from the atmosphere into the soil.
So that’s what you can do, but that’s probably a different topic.
BARNES: Yeah. Yeah. Okay. I feel like that’s probably unique to you guys, not the general for most people, is it?
QIU: It should be because that’s a huge huge topic, because since the 60s the chemical fertilisers got introduced, and that’s the conventional agriculture, which is now completely based on chemical fertilisers, relying on chemical fertilisers because they are destroying the microorganisms in the soil.
So, if you destroy the microorganisms in the soil, your plants are depending on chemical fertilisers.
They’re like the fast food for the trees.
Sure.
Because in your soil, you have nutrients, but the trees cannot pull it up because they’re too big.
So, let’s say the nitrogen chain is too big.
So you need the microorganisms to break them down, but they cannot because your soil is not alive.
And that’s why you need the chemical fertilisers as fast food.
Yes.
And if we can reduce the chemical fertilisers, we make the soil alive again.
We are not depending on chemical fertilisers anymore.
We can reduce our costs.
BARNES: Sure.
QIU: And could sell cheaper and we’re more compatible if we do commodity coffee.
BARNES: Yeah. Sure. Are your chemical fertilizers mostly imported or locally?
QIU: So Vietnam is producing but most of it is still imported, a lot from China, the US and Europe.
I made actually a small research because I always went to the shops and said I want to buy Vietnamese one because I want to have a lower CO2 footprint because it the transport is shorter.
But then I made the research, and it came out that if I would buy it from Europe, it has the lowest CO2 footprint because they use more renewable energy and Vietnam is mainly on coal.
So in the end, it’s still better to buy from Europe.
BARNES: Yeah. Swings and roundabouts, right?
QIU: Crazy. Yes.
BARNES: Yeah. I can imagine.
Okay, man. Cool. Look, that’s that’s plenty for me for what I’m working on. Did you have anything you wanted to add? Anything I’ve missed about the coffee — ?
QIU: I mean we are always fighting for for trying to introduce more sustainable sourced coffee like direct trade.
So it would be always amazing if you could kind of implement that, because the coffee price we’re talking about, which is mainly now affected, is about the commodity.
Most of the Vietnamese coffee is sent to big collection centres for Nestlé, Unilever, Coca-Cola, Pepsico, Ili, Lavazza.
And that’s what where we try to get away from, try to sense, like sensitise people to buy more sustainable coffee.
But I know that you’re more writing for investors.
And in the future we are having less and less Arabica and we’re going to have more Robusta and probably Liberica, and maybe that’s a keyword for you because that’s the most sustainable future coffee species because they can withstand higher temperatures.
They’re more resilient, and Arabica is absolutely not.
So if you write for investors, they should maybe look into Robusta and Liberica to invest for the future.
BARNES: Liberica. Okay. Is that something that is becoming common in Vietnam, or — ?
QIU: We are growing 95% is is Robusta and Libera is now coming, and they’re starting having competitions.
We went on competitions as well, and now people in Indonesia they start planting only Liberica farms.
They are commercialized, not common, because it’s hard to take care of them.
They need minimum 2 m 20 of height before you can harvest them, before they get flowers. So it’s a pain in the ass.
But if you get more and more different varieties, maybe it can get improved. You can maybe go in with machines, etc., etc.
Yeah, because they can live below 1,000 meters, still are really resilient to high temperatures above 35° rots and too much water.
So actually all the problems we’re facing now with Arabica, Liberica could could fix it, right?
So maybe that’s a topic where you could write for the future investment in coffee.
BARNES: Yeah, sure. Would I have tried it anywhere? Like what are they using Liberica for? Is it like instant coffee or is it like specialty coffee or — ?
QIU: No.
So it’s at the moment still specialty because it needs a lot of work to do.
But because there’s so little knowledge about it.
So the roasteries, they don’t have the market yet for it.
So it needs to get more and more popular.
But the flavour profile is really close.
It’s closer to Arabica than to Robusta.
And that’s why it makes it really interesting.
Yeah. If you have the chance, if you go to a specialty coffee shop, I don’t know where you are now living.
If you can ask for Liberica, if they have it, you could try that.
BARNES: Yeah. Okay. Cool. Cool. I will keep that in mind. Awesome. Anything else?
QIU: No, that’s that’s that’s pretty much it.
Thank you very much.
And can I read it somewhere?
Can you send me the link?
Something like that.
BARNES: Yeah, sure. I’ll send you the link once it’s all written out.
Yeah. Of course.
I’m just curious. I used to I did a I don’t know. I lived in Vietnam for a long time. I worked on a a project down in Ha Tinh. It was called HEPA. Are you familiar?
They’re a sorry they’re like a what do they call it, like organic farming, kind of like under the forest canopy, sustainable, all that sort of stuff.
I don’t know, just what you’re talking about doing it sounds like something they might might have been involved in.
QIU: But yeah, so yeah so like their agroforestry you could do that like try to create.
BARNES: Yeah.
QIU: Yeah. So they try to create recreate a forest so you have the top layer middle one and the lower one.
Totally believe in that. That’s that’s awesome. Your own —
BARNES: Yeah.
QIU: We could grow for example, the higher ones could be let’s say durian or like any trees which have which are growing high then you can have your coffees in between and then you can have the lower ones legumes you can have smaller plants, bushes lime trees, you can even plant vanilla in between so it’s it’s really interesting.
Yeah.
So you lived in Ha Tinh?
BARNES: No, I I lived in Hanoi, but the I worked for an NGO. They actually work in land rights in I don’t know all over. But part of their their sort of business model was an eco-tourism thing in Ha Tinh.
This lady, she got this bunch of land given to her back in the 70s and it was a mess right on the border with Lao. And so she spent I don’t know she spent years cleaning it up and fixing it.
They’ve turned into this like beautiful like rainforest and they put in these old, I think, the old Thai houses like the ethnic minority Thai.
QIU: Yeah.
BARNES: On stilt houses and like so I spent a few days there a couple of times.
I was helping them with like a marketing project, but one of the crops they grew was coffee as part of their agroforestry thing and they do like seminars and stuff and so that’s why I thought maybe you might have been.
QIU: Yeah. What was the name of it?
BARNES: It’s it was called HEPA for short. H E P A. I can’t remember what — H E P A in Ha Tinh.
QIU: Ah, okay. Okay. Okay.
BARNES: Human ecology something —
QIU: Yeah. Eco-farming school. They have the — I saw they have a Facebook profile. Okay. I will have a look into that. That sounds interesting.
BARNES: Yeah. Yeah. That sounds like kind of in your field of — Yeah. Yeah. Yeah. Great. But anyway, cool.
QIU: Thank you very much for your time, and hope to hear from you then.
BARNES: All right. Have a nice — cheers, mate.
QIU: Bye.
BARNES: Bye.