Vietnam to stockpile coffee to fight low prices

Mar 19, 2010, 8:36 GMT

Hanoi - Vietnam, the world's second largest coffee exporter after Brazil, plans to stockpile coffee to reduce global supply and give a boost to low prices, a senior government official said Friday.

Deputy Minister of Agriculture and Rural Development Diep Kinh Tan said a plan to extend subsidized loans at 6 per cent interest for companies to buy and stockpile coffee at 1.24 dollars per kilogram was awaiting government approval.

The plan aims 'to stop the price from dropping, and help ease farmers' and exporters' difficulties,' Tan said.

Vietnamese coffee farmers and exporters have been hurt by falling coffee prices since the beginning of 2010. The price on the London market of Vietnam robusta beans for May delivery has fallen from 1,361 dollars per ton on January 4 to 1,280 dollars on March 18.

'Neither farmers nor exporters can sell coffee now,' said Doan Trieu Nhan, senior adviser of the Vietnam Coffee and Cocoa Association. 'If farmers sell now, they will suffer big losses, but if they don't, they won't have money for their daily lives or their children's school fees.'

Nhan said Vietnamese farmers, most of whom live in the country's central highlands, lacked money to invest in their crop for next season.

'I have decided to chop down my coffee trees,' said Nguyen Van Hien, a farmer in the central province of Gia Lai. 'My family has suffered a lot over the past two years because of low coffee prices.'

Hien said his two hectares of coffee normally earned annual profits of some 4,000 dollars. But last year, despite an abundant crop, low prices led to a 2,000-dollar-loss.

'Each kilogram of robusta beans costs just 23.000 dong (1.24 dollars), much lower than investment costs,' Hien said.

Nhan said coffee exporters had stockpiled beans at higher prices earlier in the year, and stand to lose if they export now.

Vietnam planned to export between 850,000 and 900,000 tons of robusta beans this harvest year, which started October 1, Nhan said. The country has exported nearly 500,000 tons so far this harvest year.

The exports are believed to have contributed to a worldwide oversupply and driven prices down. Vietnam robusta coffee accounts for 14.3 per cent of global output.

Coffee industry analysts expect prices to rise in the long run, as worldwide production capacity is expected to fall behind rising global demand.