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NEWS UPDATES 7 January 2010

Vietnam to stockpile coffee to boost price

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Vietnam's Agriculture Ministry has sought government approval to allow exporters to stockpile 200,000 tonnes of coffee, or a fifth of the current 2009/2010 crop, in an effort to shore up prices,, quoting traders.

The plan, forwarded to the government in late December, included a proposal that the government grant exporters an interest rate subsidy on loans to help them buy beans, a Vietnamese exporter and a dealer at one foreign firm told Reuters on Wednesday.

They did not say how long the 200,000 tonnes, or 3.33 million 60-kg bags, of coffee would be retained. If approved, the plan would temporarily take off the market nearly 20 percent of the current coffee crop of 17.5 million bags based on an International Coffee Organization estimate, making it harder to buy Vietnamese robusta even though the harvest is ending in two weeks.

"Members of the coffee association and the coffee exporters' club would benefit from this plan as they will have cheap funds to buy beans," the coffee dealer said.

Based on domestic market prices of 24,100 dong per kg, exporters would need around $260 million in bank loans to buy coffee beans. The plan was first initiated last July when the Vietnam Coffee and Cocoa Association urged the Agriculture Ministry and the Industry and Trade Ministry to seek government approval on interest-free loans to stockpile coffee in the 2009/2010 crop year.

But little was heard from the ministries until early last month when an Agriculture Ministry official told Reuters the ministry considered coffee a strategic commodity as it generates more than $2 billion a year in export revenues.

Traders said the government needed to check the plan closely given the Vietnam aims to reduce the country's lending growth this year to 25 percent to prevent the return of hyperinflation after loans surged 38 percent in 2009.

Vietnam is the world's second-largest coffee producer after Brazil and the largest for the production and export of robusta beans used for making instant coffee. Its supply accounts for nearly 15 percent of the world's total.


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