Despite lower coffee output, domestic prices have decreased to the lowest level in three years, adding insult to injury for broke farmers who can't afford rising production costs.
Coffee output from the 2013-2014 crop, from last October until September next year, is expected to fall by 15 percent over the previous year due to unfavorable weather conditions and a high proportion of old trees with low yields, according to the Vietnam Coffee-Cocoa Association (Vicofa).
Drought and diseases seriously affected productivity and quality in the coffee sector, said vice chairman of Vicofa Nguyen Nam Hai.
Now, old trees with low yield and poor quality account for some 25 percent of coffee cultivation area in Vietnam, he said. The country has failed to grow new coffee trees to replace old ones because farmers lack capital, according to Hai.
Despite the smaller output, coffee prices on the domestic market have dropped to the lowest level in three years amid lower prices on the world market. The price of robusta coffee offered by traders to local farmers had fallen to VND29,000-30,000 (US$1.38-1.43) per kilogram early this month, down from VND39,000-40,000 per kilogram one year ago, according to Vicofa.
Nguyen Van Nghiem, vice head of the Department of Industry and Trade of Dak Lac Province, the biggest coffee producer in Vietnam, said the province is expected to harvest 430,000 tons of coffee this year. The lower prices could slash the province's earnings by some VND4.3 trillion this year compared to last year. The figure is 1.5 times more than the province's annual state budget payments.
"Production costs reached some VND75 million per hectare of coffee. With the current price, farmers will face losses if their coffee output is lower than 2.5 tons per hectare," said Luong Van Tu, chairman of Vicofa.
Nguyen Xuan Thai, director of coffee production and export company Thang Loi, said production costs had sharply increased due to rising costs for fertilizer, equipment and salaries. The lower prices have cost many coffee producers 10-12 percent of their normal profits.
"If the government does not support local farmers in temporarily stockpiling coffee, the prices will continue decreasing," he said.
The association has suggested that the government help the sector stockpile 200,000-300,000 tons of coffee from the 2013-2014 crop until prices rise.
Most farmers don't have stockpiling facilities and usually have to sell their beans immediately after the harvest no matter how low the prices are because the beans would otherwise go rotten.
Vietnam exported nearly 1.1 million tons of coffee valued at $2.3 billion in the first 10 months of this year, downed 24 percent and 23.9 percent, respectively, over the same period last year, according to the General Statistics Office.
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