Coffee retention out of season
By Hong Van in HCMC
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| Even when coffee farmers enjoy a bumper crop, a profit is not ensured due to price upheavals - Photo: Kinh Luan |
Pham Van An, director of Lam Dong Province’s Department of Agriculture and Rural Development, looks thoughtful when asked about the benefits that the national coffee retention scheme brings about. He does not give the direct answer, but says there should be another way to render support to farmers.
“There need to be another policy which must be more timely if coffee farmers are to be supported,” says An, who is responsible for supervising the coffee retention scheme in the Central Highlands province.
When the coffee retention scheme was announced months ago to stock as much as 200,000 tons of coffee, or some one-fifth of the national yield, to buoy up the sagging price, many onlookers were confident that the measure would lend a big helping hand to farmers. However, insiders hold another view when the retention scheme wrapped up last week, with insignificant results.
A failed scheme
Under the scheme, initiated by the Ministry of Agriculture and Rural Development and Vietnam Coffee and Cacao Association (Vicofa) and approved by the Government, engaging enterprises could have access to subsidized loans as the Government will bear six percentage points in commercial loans from banks.
In Daklak Province, which is the key coffee-growing locality of the country, five enterprises were assigned to buy up the stock. However, when the scheme expired on July 15, these five coffee traders were able to buy a mere 17,000 tons of coffee for temporary stock instead of two-thirds of the total amount as planned.
Under the Government’s decision, Vietnam Agriculture and Rural Development Bank is the only creditor mandated to offer preferential loans for the temporary coffee reserve. About only VND400 billion, however, was disbursed in Daklak Province for 17,000 tons in stock.
In Lam Dong Province, the second biggest coffee producer in the country, the temporary reserve is even lower.
Do Van Nam, director general of Vietnam National Coffee Corporation (Vinacafe), complained that enterprises found it difficult to take out loans due to the high interest rate. Besides, the bank is said to have tightened its credit because many coffee traders suffered losses and lost their creditworthiness. Hence, a complicated procedure, including a coffee stock enumeration attested by local authorities, for the loan access was required by the credit.
As most coffee traders are not highly rated by the bank, the lender asked for negotiated interest rates, which might be as high as 18% a year.
Therefore, even though the Government was ready to pay six percentage points in the borrowing rate, coffee traders still found it unbearable to pay the interest sum equivalent to the remaining 8% to 12% per year.
Submerged iceberg
Above reasons seem not to be good explanations for the failure of a scheme expected to drive coffee prices up to help poor and vulnerable farmers. The scheme was announced by the Prime Minister in April as a good policy when local farmers suffered losses due to decreasing coffee prices.
In an email sent to the Daily, Cao Dang Dung, a farmer in Dak Lak, said that most farmers in the province lack capital, driving them to sell coffee immediately after the harvests to pay debts and cover basic needs.
Meanwhile, the coffee retention scheme was seen a late policy. It was announced in April while the coffee harvest normally takes place between October and February. It means when the scheme was born, farmers had nearly sold out their crop.
Dung said big stocks at that time were kept by rich traders instead of farmers, so the coffee retention policy did not benefit farmers, although it was designed to ensure a profit margin of 30% for farmers over the production cost. Furthermore, traders involved in the scheme only agreed to buy coffee at market prices, regardless of much the production cost is. This also means traders, not farmers, will benefit from the scheme.
The policy did not come timely, said the farmer Dung from Daklak, insisting farmers should be given financial support earlier on so that they can retain coffee on their own. The current grim reality is that farmers have to offload all their crops to have money to repay debts.
“Farmers must sell quickly no matter how the prices are at the time after harvest,” said Dung, adding that not more than 30% of the total production is stored by farmers.
The Saigon Times Daily