More than 40 coffee businesses and dealers in the Central Highlands provinces of Dak Lak and Dak Nong have recently fallen into debts and losses, and some have even gone bankrupt, due to the unexpected slumps in coffee prices.
Hundreds of coffee growers in Dak Nong’s Dak Mil District are greatly concerned over the news that many coffee firms and dealers are on the brink of insolvency.
One of the debt-stricken dealers is Lan Thong, which owes growers 22 tons of coffee and VND1.2 billion, its owner Le Thi Kieu Nga said.
“We are indebted by VND2 billion at a bank, and owe 80 tons of coffee to local farmers,” admitted Trac Nhon Dieu, who heads the Lan Dieu dealer.
Early on, dozens of farmers confronted the dealer to ask for their debts, fearing that Dieu would flee.
Anticipating a price hike, Dieu had borrowed bank loans to stockpile a huge amount of coffee from farmers at a fixed price.
“But then the price suddenly dropped, driving the dealer to sell at prices even lower than their purchase prices, in order to clear bank interests,” said Dieu, in explaining his liability and losses.
“The bank then refused to offer more loans, exacerbating our situation.”
Similarly the Minh An cooperative, which has recently eyed a brand sale to escape from its tough spot, is also beleaguered by debts due to the false market predictions.
The cooperative spent all of its capital to stock 350 tons of coffee, in a hope to reap big profits when prices soared, its head of the managing board Nguyen Van Toan said.
“What we never expected was that prices fell sharply, and we had to empty our stock at low prices to settle debts, and ended up having no capital to continue operations since banks refused to lend us money,” said Toan.
He also admitted that the cooperative had also invested a great sum of money borrowed from many banks and local farmers in setting up facilities, warehouses, and a powdered coffee processing plant.
“However, as we have no capital left, all of the facilities are left unused,” he said.
Even major coffee exporter like Vinacafe Buon Ma Thuot are in trouble.
“Our overdue debts were as much as VND2.9 trillion in 2010, and around VND1.62 trillion now,” its board of directors said.
Farmers suffer most
Phan Hong Giang and his wife Nguyen Thi Kim Hue have had to sell their house in Buon Ho Town of Dak Lak to clear the bank loan that they had borrowed to re-lend to Ha Thi Vui, a local coffee trader who defaulted on her debt recently.
“As Vui never showed up at the court regarding her insolvency, it seems it will be impossible for us to get back the VND150 million we lent to her,” said Giang.
“I have no choice but to sell my house.”
Sharing his fate are dozens of other locals who are also on the verge of losing all of the money and coffee they have lent or deposited to Vui.
A number of dealers in Buon Ho Town have also followed Vui in defaulting on their debts, sending around 600 local residences to the brink of losing assets.
“Once coffee companies and dealers go insolvent, it is the farmers who have to suffer the greatest damages, since they have all lent money to the former without appropriate receipts and papers,” said an official from the district economic bureau.