About 20 coffee exporters of the Vietnam Coffee Club have decided to insist on a cash-upfront method of charging to avoid heavy losses caused by the drop in coffee prices.
Previously the price was set on settlement day, which could be several weeks after the coffee was exported. By that time the price of coffee could have dropped.
Club secretary Nguyen Nam Hai said the invoicing would be on an “outright sale” basis which transferred ownership to the buyer immediately and the price was set at that point.
This helps the exporters avoid being exposed to any drop in price of the product.
The club members exported 800,000 tonnes of coffee from the last crop, being 80 percent of the country’s total coffee export value, so the losses were big, Hai said.
The outright method would also stop domestic companies selling coffee in big volumes at the beginning of a new crop which tended to force the price down and cause processing and transportation problems, Hai said.
The bumper crop of 2008-09 was a prime example. A glut on the market led to a fall in export value; 1.2 million tonnes brought in $1.8 billion, down $200 million on the previous crop..
Hai said the delay in payment didn’t accurately reflect the laws of supply-demand and caused exporters big losses. Also, the lower price was dissuading farmers from growing coffee.
Meanwhile, the new crop for 2009-10 in coffee hubs in the Central Highland provinces of Gia Lai, Dak Lak, Lam Dong and Dong Nai is predicted to be lower than previous crops due to bad weather conditions, putting further economic
The Vietnam Coffee Association has called on the government to set up a support fund to buy 200,000 tonnes of coffee from farmers to get them over the bad patch.
“This is not a stimulus package. It must be considered as a preferential policy for coffee industry,” Hai said.