Coffee Prices Soaring in Vietnam

3:26:30 PM | 7/8/2005

Coffee Prices Soaring in Vietnam


The prices of coffee products in the central highlands province of Dak Lak, Vietnam’s largest coffee growing area, on February 19 were up by VND1 million to VND10.8 million (US$680) per ton against previous week.


Meanwhile, the export price of 5 per cent broken coffee also rose by US$65 to US$720 per ton, coffee traders said on February 20. (US$1=VND15,745).


The higher coffee indexes were attributed to the holding back beans on expectations of better earnings in the future of coffee growers in Vietnam, the world's largest robusta coffee producer, due to dry weather.


Traders said the bad weather conditions and a shortage supply will also help push up coffee export prices in the months to come. The Ministry of Trade also forecasted a hike in the local coffee price this month. "Farmers are not selling after the Tet (Lunar New Year) holiday as they now foresee the upcoming dry weather and the selling pressure for cash at Tet is over," said a trader in Ho Chi Minh City.


The dry season often peaks in March and early April before ending in early May in the Central Highlands region. Unusually dry weather in the Central Highlands might cause a water shortage in the next few weeks, they said.


The six-month dry season in the region began in September last year, about a month earlier than usual, which had reduced water reserves in the five central highland provinces that produce a combined 60 per cent of Vietnam's total coffee output.


In related news, local banks are worried about the high rate of bad debts incurred by coffee trading companies and farmers in the Central Highlands. In the 2003-04 crop, outstanding loans given to coffee companies accounted for 43 per cent of the combined figures of banks, which stands at VND930 billion said Tang Hai Chau, deputy director of the Dak lak branch of the State Bank of Vietnam.


The rate of non-performing loans given to companies in the coffee sector in Dak lak province is many times higher than the regulated rate which is put at 5 per cent of the total outstanding loans.

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