Plunging coffee prices, the lowest being paid in three years, are causing great concern for Vietnamese traders and coffee growers. Speculators ar being blamed for much of the turmoil rather than oversupply, but Vietnamese traders are also being blamed for displaying a lack of unity and professionalism by some industry observers.

"I can say for sure that the coffee price has been decreasing because of speculators squeezing the market," said Vietnam Coffee and Cocoa Association (VICOFA) chairman Luong Van Tu. "The price decrease should not be blamed on the laws of supply and demand. Speculators have been deliberately distorting market forces to make profit."

 Tu claims that throughout May speculators advertised that prices would rise steeply, prompting Vietnamese exporters to start hoarding coffee.

"A lot of enterprises borrowed money from banks to collect coffee from farmers and stock it," Tu said. "Now they have to sell that coffee at depressed prices so they can pay back the money they borrowed. Then in June, the speculators stopped purchasing coffee to push prices down. They started rumors that the coffee price would drop further towards the year end. Vietnamese enterprises which had hoarded coffee panicked and rushed to sell out. As the result, many Vietnamese companies are incurring losses of VND3 to 4 million (over US$200) per ton of coffee. A lot of enterprises have reported total losses of VND100 million (US$5,846) to VND500 million."

This is not the first time this scenario has played out to the detriment of Vietnamese traders, Tu said.

"In fact, our association, VICOFA, has often warned members about the risks of ‘playing the market.’ This same thing occurred in October 2008, and is remembered as ‘black October’. However, enterprises have not learned their lesson," he said.

While coffee hoarders are paying a bitter price, there are also traders that entered into export contracts without having the coffee in hand. These traders are obligated to supply the coffee in September, but, because of the huge drop in coffee prices, farmers are now unwilling to sell.

VICOFA has four recommendations to offer.

"First, exporters should learn carefully about the buyers, and should not sell products to speculators who may force prices down," according to Tu. "Second, they should not sign contracts for forward delivery while they don’t have the coffee in hand. Third, enterprises should inform each other about export prices. Fourth, enterprises that have fallen into difficulties need to take timely and wise steps to cut their losses."

VVICOFA is proposing to purchase and hold coffee on behalf of the state to stabilize the market and help minimize risks faced by traders.