Over the past three years, many of the coffee trading companies operating in Dak Lak have announced bankruptcy, putting the pressure on local growers.
Farmers selling coffee to an agent in Buon Ho Town
Many of these companies refuse to pay their debts to coffee growers, even though many contracts of this type have carried on for decades. Local growers regularly bring their yields to large buyers, often waiting for the most opportune time to sell.
According to the provincial Department of Industry and Trade, during the 2009 – 2010 harvest 24 agents and firms, mostly private, went belly-up. Among those, 14 of them held a total of 1,788 tonnes of coffee, worth VND50 billion (USD23,800). They also owed around VND37 billion (USD1.76 million) in past debts.
One company, Hai Than, of Ea H’leo District refused to pay growers for 352 tonnes of coffee beans. Another company called Chung Dao, based in the town of Buon Ho received 390 tonnes of coffee beans without reimbursing the farmers. Other large traders in the area did the same.
These statistics, however, are unofficial. The real figures are likely much higher.
Recently, Ea H’leo District has witnessed 10 announced bankruptcy of coffee trading companies. Six of them have ceased operations altogether, while the other four have had their VAT invoices revoked. They still owe hundreds of billions to local growers.
The situation is similar in the town of Buon Ho, where farmers have complained that many companies are refusing to make good on contracts.
Pham Duong Thanh, Chairman of An Lac Ward People’s Committee, Buon Ho, said that many people have been demanding that these companies pay their debts, causing a potential for disorder. Truc Tam Trading Company liquidated all of their assets and fled the area completely, leaving the growers with nothing.
Nguyen Tuan Ha, Deputy Director of Dak Lak Department of Industry and Trade, said the department proposed that the local Department of Justice design specific regulations for contracts between growers and traders.
Districts with extensive coffee plantations have asked that Buon Ma Thuot Centre for Coffee Exchange create a system that would allow the preservation of beans to ensure the financial value of farmers' crops.
Farmers struggle, traders try to hang on
Because of this spate of bankruptcies, several individual growers have decided to store their yields at home.
Dinh Van Linh, of Ea Tan Commune, Krong Nang District, said, prices have seen a sharp decline recently. Now, he said, beans go for just VND36,000 (USD1.71) per kilogramme, compared to VND52,000 (USD2.47) last year. He decided not to sell, however he does not have proper storage facilities at his home. This could lead to his entire crop being damaged by rot or fungus.
This has affected not only growers, but other coffee trading firms. Tran Anh Dung, owner of Dung Ngan, which operates out of Buon Ho, said that because so many companies have been going defunct, growers are bringing less of their crops to sell to traders.
Chau Phuc, owner of an agent specialising in the purchase of agricultural products in Krong Pak District, said that trade in general is on the decline. He added that their largest coffee contracts were for between 3 to 5 tonnes, worth around VND200 million (USD9,500).
