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March 21, 2009

Tight credit hits Vietnam coffee farmers
Many coffee farmers are struggling to receive necessary loans ahead of harvest as developing nations feel the global credit crunch, and the industry needs to address this issue, Reuters quoted a Starbucks representative as saying Friday.

The inability of many farmers to get loans has the potential to negatively impact yields and force them to sell their coffee at low prices, said Colman Cuff, managing director of Starbucks Coffee Trading Company based in Switzerland.

He spoke on a panel at the National Coffee Association of USA's annual convention in Florida. Starbucks Coffee Trading Company is a subsidiary of Starbucks Corp.

"I think it's something, as an industry, we need to address, especially as the credit crunch has moved from developed countries to developing countries," he said.

Many coffee-producing nations are developing countries in Central America, Africa and South-East Asia. Farmers typically use loans to pay for fertilizer and labor before they harvest and sell their crops.

"It's hard to say the impact now. I think it'll have a more dramatic increase as it goes forward but ... it generally would cause people to sell coffee at inopportune times if they don't have access to credit," Cuff told Reuters on the convention sidelines.

Starbucks partners with three nongovernmental organizations that provide low interest loans to small producers.

"We think the model works very well and should be expanded because everybody needs some labor to pick their berries," Cuff said.

"We don't require that it be coffee sold to us. All they need is to have a contract to somebody, and they get access to credit before the harvest," he said.

Dub Hay, senior vice-president Coffee and Tea for Starbucks Coffee Company, told Reuters that the company currently has about $12.5 million on loan through three NGOs that go directly to coffee farmers.

"Banks are hanging onto their money right now, which is going to hurt coffee producers. I think it's time for the industry to step up," Hay said.

Starbucks, the world's biggest coffee chain, will soon look to Asia to help coffee farmers increase yields and quality, Cuff said.

The company has shown farmers in East Africa how to boost these two factors through generally simple techniques and better use of fertiliser, and plans to do the same in Asia in the near future, he said.
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