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Softer loans won't quicken Vietnam coffee replanting

Thursday, December 31, 2015, 15:58 GMT+7
Softer loans won't quicken Vietnam coffee replanting
Coffee beans are displayed at an exhibition in Hanoi December 10, 2015.

Cheaper credit extended to Vietnamese coffee growers for replanting part of the world's biggest robusta production will not accelerate the process that has already been hindered by lengthy paperwork, traders and analysts said on Thursday.

Vietnam aims to replace old coffee trees, now accounting for a third of its acreage, to boost yields by 2020, but the government-backed credit worth 12.5 trillion dong ($556 million) in place since May 2013 has attracted few growers.

From January 2016, the lending rate offered by state-run Agribank will be cut to 6.5 percent per annum during the grace period, from 7 percent now, the central bank said on Wednesday.

But few coffee growers have so far accessed the cheaper credit due to loan conditions.

Agribank said it has disbursed just 800 billion dong under the package since 2013, or 6 percent of the total credit.

"The rate becomes more attractive, but the issue rests not with interest rates, but the conditions to access the loans," said Bach Thanh Tuan, head of the Daklak-based Community Development Center, which helps farmers maintain sustainable production.

Daklak province produces a third of Vietnam's coffee.

Most farmers have been avoiding the loans as they find it hard to obtain local government's certificates on the replanting area and on the land-use right in order to qualify for the credit, traders said.

"Farmers simply don't borrow, while they replant trees slowly, bit by bit," a Vietnamese trader based in Daklak said.

The replanting programme, coupled with adverse weather leading to early blossoms and low prices, has been expected to trim the country's coffee output in coming years, Vietnam Coffee and Cocoa Association Chairman Luong Van Tu said.

Price falls have already prompted many Vietnamese coffee farmers to switch to growing pepper and other cash crops, traders said.

Robusta futures, closely tracked by Vietnamese coffee prices, have been falling in line with lower crude prices, Vietnam's harvest and a weak currency in top producer Brazil in recent months. ICE January robusta contract hit a two-year low on Nov. 30.

On Thursday robusta stood at 32,900-33,500 dong ($1.46-$1.49) per kg in Daklak, down around 7 percent so far in the October 2015/September 2016 crop year and also a decline of 16 percent from Dec. 31, 2014, based on Reuters data.

Vietnam's coffee exports in calendar year 2015 dropped 24.3 percent from last year to an estimated 1.28 million tonnes, while earnings fell 27.8 percent to $2.57 billion, the government said. ($1=22,480 dong).



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