Coffee vs. Cacao: A Case Study from the Vietnamese Central Highlands

Abstract

Mr. Nam, the vice chair of a village in Dak Lak province of Vietnam, was keen to protect farmers in his village from the sharp decline in prices of coffee (Coffea canephora Pierre ex Froehner). He did this by encouraging farmers in his village to plant cacao (Theobroma cacao L. subsp. cacao). Cacao was suitable to the soil and climate of the area, and because a foreign company had promised to buy cacao from the farmers, it seemed to offer greater financial security. However, uncer tainty about crop losses due to pests, the cost of chemicals such as pesticides, and potential fluctuations in the prices of cacao made it imperative to carefully evaluate the benefits of cacao production. In making his recommendation to the village, Mr. Nam utilized additional information about the potential demand and the marketing networks for cacao. The decision to switch from coffee to cacao provides a village-level example of learning about agricultural supply and demand issues, perennial crop production, and economic and environmental consequences of growing particular crops. This case was written for undergraduate students in agriculture and forestry programs at Nong Lam University. Students were expected to understand the nature of land use changes and major issues facing the coffee farmers in the central highlands of Vietnam. They were also encouraged to identify and critically evaluate economic and environmental benefits and costs, and the policy and institutional supports needed for ensuring a sustainable cocoa production in the Central Highlands. The case was subsequently translated into English and used in classrooms at Purdue University. T he province of Dak Lak is located in the Central Highlands of Vietnam. The province has a total population of nearly 1.8 million people, accounting for 58% of the population of the four provinces of the Vietnamese Central Highlands. With most of its basal soil having advantageous qualities such as a fine texture, a high water absorption level, and high fertility, Dak Lak is well-suited for the production of various perennial industrial crops including coffee, rubber, pepper, cashew, and cacao, as well as annual crops such as hybrid maize and cotton. During the past decade, both planned and spontaneous immigration have created demographic pressures in Dak Lak. The influx of people has also played a major role in transforming the physical and socioeconomic landscape of the province. The liberalization and global integration of Vietnamese trade has resulted in a dramatic change in land use in upland areas. High market prices for coffee in the early 1990s motivated many farmers to plant coffee from valleys of the Central Highlands up to areas that were fully forested not so long ago. In the decade from 1990 to 2000, coffee area in the province expanded greatly, by about 14% per year. By 2000, the coffee plantation area in Dak Lak had reached 260,000 hectares and coffee accounted for 57% of agricultural land and 86% of industrial crop area in the province. Dak Lak is one of the most specialized coffee regions of the country, accounting for 50% of total area and 53% of national output (Ha and Shively, 2004). The coffee production system in most areas of the province is monocultural, relying on high levels of fertilizer and pesticide, large consumption of water, and full market orientation. Households that produce coffee on a small scale (about 1 hectare per household) comprise the majority of coffee-growing households in the province. During high-price periods, with coffee as the main source of income, all coffee producers were encouraged to invest strongly in new tree plantations and maintenance of current plantations. Motivated by high coffee prices, many farmers planted coffee even when they had no experience cultivating coffee and no knowledge regarding local conditions for growing coffee. Many planted coffee on very steep slopes with unsuitable soil and water conditions. The expansion of coffee production has broken down the ecological balance of the region. Forest cover decreased from about 90% in the 1960s to 57% in 1995 and to less than 50% in the late 1990s (ICARD and Oxfam, 2002). In the past 20 years, Dak Lak has lost 20 thousand hectares of forest a year to both public and private coffee plantations and farms. The serious devastation of the forests brought about by the increase in coffee plantations has led to an ecological imbalance, particularly an inability to regulate water resources. Agricultural expansion, especially of coffee, reduced marginal forest area. Farmers note that floods seem to be increasing in frequency and magnitude. The natural surface flow is also ob served to be decreasing over the years and soil erosion is becoming increasingly common. Coffee is a water-intensive perennial crop. About 40% of the current coffee plantation area is irrigated by groundwater, using up about 66 million m 3