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Businesses beg for capital, or coffee plants will wither

The Ministry of Agriculture and Rural Development (MARD) has asked the Prime Minister to instruct commercial banks to provide loans to coffee export companies, which are in distress.

coffee plant, vietnam, capibal, coffee producers

Big losses foreseeable

The coffee price in the domestic market and export price are now at the deepest 3-month low.

In early November, coffee was traded at VND30,000 per kilo in the Central Highlands, a decrease of VND10,000 per kilo in comparison with the same period of the last year. The price has later moved up to $1,575 per ton. However, the price still has dropped by 18 percent so far this year.

A lot of coffee exporters can foresee big losses, because they collected coffee before at high prices, while they have to export coffee now at low prices to get money to pay due debts.

Chair of the Vietnam Coffee and Cocoa Association (Vicofa) Luong Van Tu said businessmen have asked for preferential loans from the government at low interest rates. They plan to collect 300,000 tons of coffee for storage and would only export coffee when the prices go up again, believing that transactions would return in the first half of 2014.

Tu thinks that the current price levels are too low for exporters and farmers to make profit, and that it is necessary to help exporters store coffee now so as to sell for better prices in the future.

Also according to Tu, if the prices stay at low levels for a long time, farmers would chop down coffee plants and grow other plants which are believed to bring higher profits.

The State Bank of Vietnam has also submitted to the government the program on supporting the coffee replanting. If the program is approved, the government would assign the State Bank to refinance VND12 trillion to Agribank which would disburse money to the coffee replanting projects.

Agribank’s branches have been told to provide loans at the preferential loans of 2-2.5 percent for medium term loans (7 years at maximum) to coffee replanting projects.

Pham Minh Tan, a National Assembly’s Deputy from Dak Lak province, said the total capital allocated to the coffee replanting program is VND3 trillion, but only VND100 billion has been disbursed so far.

A survey by Bloomberg on businessmen and goods owners has found that by November 7, Vietnam had harvested coffee on its 30 percent of the growing area. It is expected that businessmen would export 1.4 million tons of coffee in the annual crop commencing from October 1.

Vietnam

exported 1.42 million tons of coffee in 2012 and 1.56 million tons in 2011, according to the General Department of Customs.

Patience needed

Tu of Vicofa said the heavy rains and floods caused by Podul typhoon last week have forced farmers to delay the harvesting. The floods have caused severe damages to the coffee growing areas in the south of the central region.

The reports about the damages from typhoons in Vietnam have led to the robusta futures prices on Liffe in London increasing by 7 percent.

The upward trend of the coffee prices has been supported by a lot of factors, including the wet weather in the Central Highlands of Vietnam which hinders the drying, and the low robusta inventories in London. The world market is also awaiting the decision from the government of Vietnam on whether to buy 300,000 tons of coffee for storage.

Thanh Mai, VietNamNetBridge