Coffee prices have dropped dramatically, a phenomenon blamed on the massive coffee volume sold at the same time. Vietnam is taking action to push coffee prices back up.

According to Vietnam Coffee Cocoa Association (Vicofa), the Government has agreed to a six percent interest rate support program to store 200,000 tons of the 2009-2010 coffee crop. The Vietnam Coffee Corporation will manage the funds.

Vicofa will select the most capable businesses to help them store coffee. The coffee collection campaign will run between March 15 and September 15. The purchase price will be 23,000 dong per kilo at minimum for second class robusta coffee.

The world coffee price has been decreasing dramatically since the beginning of 2010. In London, robusta coffee on February 22 dropped to $1290 per ton. Just one week later, the price plunged to $1210 per ton and now has dropped to $1200 per ton.

In early March 2010, the price of coffee at HCM City ports was just $1130 per ton. The lower export price has forced the domestic price down. Coffee farmers report price drops of 2000 to 22,300 dong per kilo.

Analysts have pointed out that the massive sale of coffee within a short time leads to oversupply and is the main reason for coffee price decreases.

According to Vicofa, the only solution is waiting to sell when prices rise. This means that Vietnamese enterprises must store coffee for now.

Statistics show that, for the 2009-2010 crop, Vietnam had some one million tons. It has signed the contracts to export 500,000 tons (200 tons have already been delivered), which means that the remaining volume of coffee is about 500,000 tons.

Do Ha Nam, Deputy Chair of Vicofa, remarked that storing coffee, like storing rice, is a “strong measure” which will affect producers, sellers and buyers.

“The world coffee market will stabilize when news spreads that Vietnam is storing coffee,” Nam added.  He maintained that Vietnamese enterprises will sell coffee under a plan now under consideration instead of selling on a massive scale. This, of course, will influence the supply of coffee on the world market.

The other two big coffee exporters, Brazil and Indonesia, are also planning to intervene in the market. Nam revealed that the two countries have held working sessions with Vicofa and agree to cut the supply to raise prices.

“When farmers heard about the coffee storage plan, they calmed down and stopped selling coffee,” Nam commented.

Phung The Hoat from Dak Doa – Gia Lai district, which is holding eight tons of robusta coffee, confirms they will not sell coffee right now, as the price is too low and far below investment costs.

Source: VietNamNet/SGTT