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Vietnam Business » Vietnam Business News » Controversies heat up over coffee retention scheme

Controversies heat up over coffee retention scheme

A plan initiated by the Vietnam Cocoa and Coffee Association (Vicofa) to stock coffee to support prices has stirred up controversies over who the beneficiaries will be. In its proposal to the agriculture ministry, Vicofa suggests buying 200,000 tons of coffee at a price of VND23,000 a kilo beginning March 15 to ensure a profit margin of 30% for farmers like what is applying to rice.

Vicofa Chairman Luong Van Tu says coffee is a key export product of the country, and while rice farmers are guaranteed a 30% profit margin by the State, the same incentive should apply to coffee growers. Currently, coffee bean in the Central Highlands as the countrys key cultivation area is now priced at some VND22,700 a kilo, and is feared to fall further to the three-year low.

However, industry insiders and experts differ over how to calculate the production cost to ensure a profit for farmers.

Nguyen Cong Hoang, deputy general director of Vinacafe as Vietnams biggest coffee trader, has earlier told the Daily that years ago his corporation purchased coffee beans at VND25,000 a kilo when the price plummeted. As input costs have risen, he said, the buying price now should be some VND27,000 a kilo so that farmers could earn a profit, as the production cost now is some VND19,000 a kilo.

Meanwhile, many farmers in the Central Highlands say the production cost has hit VND25,000 a kilo, given higher labor cost and soaring prices of fertilizer and oil for water pumping.

While there remains a rift in opinions over the floor price, it is the time for starting the retention scheme that arouses most objections, and many officials and experts say the scheme if implemented now will not benefit farmers but traders.

An agriculture official of Daklak Province bluntly puts it: "Not the right time".

He explains that farmers have completed harvesting coffee in November and December, and have for the most parts sold out their crops to traders to recoup investment or to repay bank loans.

"Coffee is being stocked mainly by big farm owners, traders and exporters, while most cash-trapped farmers have sold out their crop," he says

One farmer named Dang Van Huy in Daklak Provinces CuMgar District suggests that if the Government is to lend a helping hand to farmers, such support should come under the form of rescheduled bank loans for indebted farmers.

Cao Dang Dung, another farmer there, says farmers will not benefit from the retention scheme now, as most of the coffee beans are now in traders warehouses.

An expert who asks not to be named wonders if the retention scheme is meant to support big traders who are stocking a big amount of coffee.

A small trader suggests that big traders should bear the cost of stocking coffee now, rather than seeking the State support in this case. He refers to a big trading firm who has recently inked contracts to ship 200,000 tons of coffee to the UK, saying it is this firm that should use its own capital to buy coffee from farmers.

In October last year, Do Ha Nam, who serves as general director of the HCMC-based coffee trader Intimex and also as vice chairman of Vicofa, signed agreements with two UK traders to export 200,000 tons of coffee to the partners.

Vietnam Business And Financial News Network. Source [english.vietnamnet.vn]

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