Coffee as driver of forest changein the Central Highlands of Vietnam:

Unpacking market value chain and gender issues for policy and REDD+ interventions

REDD + Businesses Side Event, COP 21, Paris

3-4 December 2015

Delia C. Catacutan, Pham Thanh Van, Rachmat Mulia & Do Trong HoanICRAF-Vietnam

Forest area increased by 18.6% primarily through reforestation during 2000-2010

But, some poor natural forests were also converted to production forests, transforming them into young and poorly stocked forests

CONTEXT: FOREST CHANGES IN VIETNAM

Deforestation continues

Direct drivers

• Agricultural expansion

• Infrastructure development

• Unsustainable logging• Forest fires

Indirect drivers

• Population and migration

• Weak forest management

• Limited funding for forest protection

Coffee is major commodity driver of deforestation, making Vietnam the 2nd world exporter of robusta coffee.

STUDY SITE • Coffee capital

• 5 provinces

• 5.5 million people (2013

• Kinh people—dominant ethnic group since the establishment of the NEZ in 1970s

• 12.56% poor; 6.93% near poor; the rest are non-poor

• Coffee constitute 85-90% of hh incomes

• The living standard has improved significantly

STUDY OBJECTIVES• Understand the coffee market value chain as

primary driver of forest change;

• Understand how men and women participate and benefit from coffee market value chain; and

• Draw insights for addressing commodity drivers in the context of the REDD+ Programme

METHODOLOGY

Literature review

Land use change and drivers

Evolution of the coffee industry, its size, output and benefits

Survey and personal

interviews

MVC 1

MVC 2

MVC 3

NPV analysis

(30 years)

Gender equity

analysis

Socio- economic analysis

MVC ActorsTotal

respondents

No. of Males

No. of Females

ProvinceData collection

technique

Producer-Local Company

Farmer/Producer 41 27 14Dak Lak, Dak Nong

Survey

Middle Man 5 0 5 Dak LakPersonal interview

Agent 6 4 2 Dak NongPersonal interview

An Phong Company 4 3 1 Dak NongPersonal interview

Producer- National Company

Farmer/Producer 53 18 35 Dak Lak Survey

Agent 2 1 1 Dak LakPersonal interview

Trung Nguyen Company

2 1 1 Dak LakPersonal interview

Producer- Multi National Company

Farmer/Producer 65 40 25 Dak Lak Survey

Agent 2 2 0 Dak LakPersonal interview

Nestle Company 2 2 0 Dak LakPersonal interview

Total 182 98 84

STUDY PARTICIPANTS

MVC

Attributes

1 2 3

Farmer %

Middlemen %

Agent%

Compa-ny Rep

%

Farmer %

Agent %

Compa-ny Rep

%

Farmer %

Agent %

Compa-ny Rep

%

Age Group (Year)

<30       50 30   50 1.5     30 - 50 61 40 100 50 41.5 50 50 50.8 100 50>50 39 60     28 50   47.7   50

Ethnic Group

Kinh people 80.5 100 100 100 0 100 100 86 100 100Native ethnic minority

15 0 0 0 100 0 0 14 0 0

Ethnic migrant 5 0 0 0 0 0 0 0 0 0

Edu-cation

Unschooled 5 0 0 0 24.5 0 0 0 0 0Primary 32 40 17 0 17 0 0 25 0 0High School 63 60 67 25 55 100 0 74 0 0Uni 0 0 16.7 75 3.8 0 100 1.5 100 50Post Uni 0 0 0 0 0 0 0 0 0 50

Econo-mic status

Poor 12.2 - - - 5.7 - - 0 - - Near poor 9.8 - - - 20.8 - - 10.8 - - Average 43.9 - - - 73.6 - - 69 - - Rich 34 - - - 0 - - 20 - -

SOCIO-ECONOMIC CHARACTERISTICS

RESULT 1: Central Highland’s coffee industry

• Sharp increase in coffee area resulted in forest loss since early 1990s; >20,000 ha forestlands have been converted in Dak Lak alone

• 650,000 ha exceeding government target of 500,000 ha; 450,000 farmers involved

• Average production: 2.8 ton/ha; 40% of coffee produced is certified

• Industry is worth $2.7 billion in export or 2% of the annual GDP

• Providing livelihoods to 2.6 m people

Key actors of the coffee industry

COFFEE INDUSTRY

Individual farms

Privately owned

companies

VICOFA State

owned company

FDIs

95% of total coffee production

85% of total export

VINACAFE

Market value chain 1

• An Phong company– a local ‘purchase and process’ company

• Agents purchase coffee beans directly from farmers; facilitate procurement and supply of farm tools and inputs through a ‘crop loan’ scheme, with high interest rates (usually 24%)

• Company does not have any contract, commitment, or investment for the agent or farmer

Farmer8,000 Households19,000 ha coffee

37 Agents at Commnue,

District

Provincial Company (An Phong)

24,000 ton coffee/year

12,000 ton coffee/year

Other Coffee Import/Export or

FDI Companies outside the

Province

12,000 ton coffee/year

12,000 ton coffee/year

Schematic diagram of traded coffee in MVC 1

SWOT –MVC 1Helpful Harmful

Internal Origin

Strength

Actors are all local, and have good relations

Weakness

No quality control and does not guarantee stable supply

External Origin

Opportunities

Close proximity between actors

Threats

Multinational companies may expand their operations and

compete with local companies.

Market value chain 2

• Formed in 1996 to ensure sustainable supply of coffee to Trung Nguyen’s roasting factory

• Trung Nguyen has the biggest consumer base in Vietnam

• Employs 5,000 staff and operates through 26 franchisees and 12,000 kiosks distributed across 63 provinces of Vietnam

• Owns four factories for roasting; produces instant coffee, and exports to China

Farmer1,500 Households

4,900 ha coffee

6 Agents in Dak Lak & Lam Dong Province

National Company (Trung Nguyen)

Coffee Processing Factory in Buonmathuot City

1,800 – 3,600 ton coffee/year

1,000 ton coffee/year

Other Coffee Import/Export or

FDI Companies outside the

Province

800 - 2,600 ton coffee/year

Coffee Procesing Products

Consumers in country and abroad

Schematic diagram of traded coffee in MVC 2

SWOT – MVC 2Helpful Harmful

Internal Origin

StrengthHas capacity to invest in farmers to ensure stable supply; can offer flexible pricing; pays agents and

farmers on time

Weakness

Currently does not have a good procurement network

External Origin

Opportunities

Trung Nguyen has the largest market share in Vietnam

Threats

Agents divert the supply to other companies

Market value chain 3

• Nestle began buying coffee in Vietnam in 2011

• Applies the 4C standards (Common Code for Community Coffee)

• Farmers are supported/trained on 4C standards

• Nestle has five factories; employs 2,000 staff nationwide; total investment 450 million USD

Farmer18,00 Households46,800 ha coffee

26 Agents in 4 Provinces

Nestle Coffee Processing Factory in Dong Nai

100,000 ton coffee/year

60,000 ton coffee/year

Other Coffee Import/Export or

FDI Companies outside the

Province

40,000 ton coffee/year

Coffee Procesing Products

Consumers in Vietnam

Schematic diagram of traded coffee in MVC 3

SWOT – MVC 3Helpful Harmful

Internal Origin

StrengthStrong supply network

Supports farmer trainingPotential to invest in sustainable

coffee

Weakness

Nestle could not work with farmers directly

External Origin

Opportunities

International standard certification

Threats

Policy constraints for foreign companies

RESULT 2: Roles of women & men

Gender roles in coffee production, household and community activities

Weeding

Spraying

Pruning

Seedling preparation

Buying farm inputs

Deciding to sell

Applying loans

Community activities

Attending children’s needs

Take care of children

Washing clothes

Cooking

0 20 40 60 80 100 120 140Men (n=98)Women (n=84)

• Gender dynamics change with land use

• Compared to an OXFAM study conducted >10 years ago, gender roles shifted significantly, with more shared roles, and women involvement in the mid-upper end of the chain

• Women now make up 50% of in-country trading activities

• Still carry the burden of unpaid house work

• But have some degree of control over income

• Men and women are generally satisfied with the coffee industry, but women were less satisfied with the income due to (1) low bargaining power; (2) burden from house work

• Policies generally promote women’s rights to access and control of productive resources

• Educated children are moving away from lower end of the chain---farm labor will be scarce and costly; older farmers, especially women will bear the cost of labor scarcity

Gender-land use change nexus: gender equity?

Price is mainly dictated by the global market

Price difference at farm level is 200–300 VnD/kg

Export price difference is up to 1,000 VnD/kg

2005

– 2

006

2006

– 2

007

2007

– 2

008

2008

– 2

009

2009

– 2

010

2010

- 20

11

2011

– 2

012

2012

- 20

13

2013

– 2

014

2014

- 20

15

0

10,000

20,000

30,000

40,000

50,000

60,000

20,50021,700

33,200

23,600

37,000

50,000

38,50043,000

40,000

Robusta coffee bean price (VND/kg)

RESULT 3: NPV analysis

Prod

uction

(ton h

a-1)

Cumulative cost (480m VnD/ha), yield (40 tons/ha) and income (980 mil VnD/ha=== 46,700 USD or 1,600 US/ha/yr) in 30 years

Major issues in coffee production

• Too much focus on quantity of produce than quality via heavy use of fertilizer, pesticides, insecticides—nematode is major problem and unsustainable irrigation techniques

• Water scarcity• Poor soil quality• Old coffee trees need rejuvenation or replanting

• All of the above are costly to address!!

Threat to REDD+ : convert forest to avoid costly repair of damage!

Conclusion• Coffee is major driver of forest change and provide net

positive returns to investment• Gender roles shifted with more women involved in the chain;

but low bargaining power and dual roles (productive and reproductive) may have caused dissatisfaction in income

• Positive gender relations at household level is reinforced by pro-women policies that enable women to access benefits

• BUT, (1) water scarcity is challenging coffee production associated with overuse of ground water and deforestation; (2) costly rejuvenation and repair of environmental damage may lead to forest conversion; and (3) women may suffer more from future labor scarcity in the coffee sector

• Concerted actions are needed from policy makers, business sector and REDD + programme

In Vietnam, major commodities such as coffee, rubber and macadamia may expand further.

Government decisions favoring these commodities could not be changed, as it aims to be a world leader in export commodities.

But is also committed to REDD+ and is trying to: (1) protect the forest; (2) reforest poor forest and bare lands with emphasis on commercial timber tree species; (3) convert natural forest to production forest; and (4) promote industrial tree plantations (rubber, coffee, macadamia, etc.)

INDC includes sustainable coffee production

RecommendationsPolicy makers

• Carefully target coffee area through land use planning and crop zoning; regulate and monitor expansion in forest lands and strictly enforce land use policies

• Use decision- making tools or research-based information to understand trade offs between forest conversion and commodity expansion; commission foresight studies

• Provide incentives for sustainable coffee/commodity production both to farmers and responsible companies (e.g. co-investment in up-front costs, tax cuts/holidays, rewards and recognition); and

• Develop gender-specific safeguards to cushion from market shocks (e.g. insurance; price guarantee; training women on price negotiation, forming women cooperatives, etc.)

Recommendations

REDD+ programme

• Conduct a study on the process and benefits of reconciling land sparing and sharing approaches

• Cover whole landscapes that are sustainably managed; account trees outside forests

• Analyse (1) cost-benefit/tradeoff of REDD+ and agricultural commodities; (2) contribution of commodities to D&D; (3) value of forest ES to support REDD+ negotiation

• Clarify the impact of converting natural forests into production forests (mostly exotic timber species) and provide policy advice on dealing this issue in the context of REDD+

• Use preventive systems approach to REDD+-----look beyond the forest!

Recommendations

Business Sector• Internalize environmental costs (externalities) and adopt

sustainable practices• Improve relationships with actors along the supply chains

and ensure better practices• Influence consumer behaviours to no longer purchase

products produced via deforestation• Support farmers to certify deforestation-free products • Adhere to good practices to align with enlightened policies

in areas such as climate change and REDD+• Make business operations compatible with REDD+

objectives

Contact: Dr. Delia Catacutan – ICRAF VIETNAM Country Representative

Tel/Fax: +84 4 37834644/45 (24) / D.C.CATACUTAN@CGIAR.ORGhttp://worldagroforestry.org/regions/southeast_asia/vietnam