Low prices to hit Vietnam coffee sales

Low prices to hit Vietnam coffee sales

BUON MA THUOT, Vietnam (Reuters): Vietnam's second largest
coffee firm said on Thursday the country's robusta exports could
plunge this year as low prices discourage farmers from selling
beans unless absolutely necessary.

Le Duc Thong, director of Daklak September 2nd Import Export
Company (SIMEXCO), said that without a recovery in international
prices, Vietnam's 2000/2001 coffee exports might drop by as much
as 20-30 percent from the previous year.

Thong was speaking to Reuters in the capital of Vietnam's key
coffee-growing province of Daklak.

International robusta prices have slid towards US$600 per ton,
or 30-year lows, from above $1,200 per ton one year ago as
Vietnam is entering its peak harvest season for yet another
bumper crop of at least 700,000 tons.

Vietnam is set to overtake Colombia this year as the world's
second-biggest coffee producer after Brazil.

"At current price levels, exports could drop 20 to 30
percent... Only the poorest farmers are selling beans, and only
when they need cash," said Thong.

Simexco plans to cut exports to 60,000 tons in the 2000/01
crop year from 79,000 tons the previous season, he said.
Vietnam's coffee crop year runs from October through September.

Traders have long lashed out at the Vietnamese official
retention plan of 60,000 tons as too little compared with its
overall production and exports, though Hanoi was not a member of
the Association of Coffee Producing Countries (ACPC) that decided
to retain 20 percent of exportable coffee to rescue prices.

With the 1999/2000 crop output of 700,000 tons, Vietnam
exported 692,000 tons of coffee beans in the previous year.

"In the domestic market, sales have been much slower so far
than in the past," Thong said, adding that some farmers did not
even have enough money to hire people to pick cherries.

Traders have said the sharp decline in London futures had
pushed local coffee prices to around 5,800 dong to 6,000 dong per
kg, well below average production costs of about 9,000 dong per
kg among private growers and about 12,000 dong among state
producers.

Thong said Simexco, a coffee trading arm of the Communist
Party cell in Daklak, was to begin purchasing coffee from farmers
next week for the government-sponsored retention scheme.

Besides, the company has already started to make advance
payment to farmers on delivery of beans into its warehouses, and
has asked the central bank for credit for such payments to
farmers, he said.

The current Hanoi retention scheme provides for designated
trading companies to acquire interest-free loans to purchase and
store a total of 60,000 tons for six months from Nov. 15. The
purchases at market prices must be complete by end-January.

Thong said initially the agriculture ministry had asked the
central bank to allow farmers to seek fresh loans from banks by
mortgaging a total of 80,000 tons of beans. But the banks
rejected the proposal, unwilling to take the direct risk related
to coffee prices.

Private speculators have come into play in Vietnam since the
previous season, buying coffee beans from farmers.

"Beside the 60,000 tons, there's an unknown amount kept by
rich people," Thong said. "In the past Vietnamese people have
kept savings in gold. Some have started keeping coffee instead
but the prices have dropped to new lows."

He said he had bought 6,000 to 7,000 tons of coffee which was
kept in warehouses on behalf of such individual speculators in
the previous season.

There has been no spare storage room left for this year, he
said.