Coffee Giant Dao-Heuang Owes 27 Billion kip to Lao Farmers

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After falling several months behind in payments for raw beans, one of the largest firms in Laos, Dao-Heuang Group, has racked up  an estimated 27 billion kip in debt owed to 2000 of the country’s coffee farmers.

According to the Champassak provincial Industry and Commerce Department, after paying off other significant debts, representatives for the company have vowed to pay off coffee growers next.

At a meeting called by the department last week, the company’s representatives were invited to join a discussion with farmers to identify solutions to the problem.

After receiving a letter of petition from the representative for coffee growers in Champassak province, the Ministry of Industry and Commerce announced that the provincial Industry and Commerce Department would cooperate with the relevant sector in attempt to resolve the issue.

Dao-Heuang Group remains the dominant coffee buyer in Laos, leaving many coffee growers with very few alternatives to sell their product as demands from other companies remain limited. The company assures debts will be paid, however has not presented a timeline as to when.

Coffee continues to be an essential commercial export crop in Laos, and the nation’s product remains popular among people domestically, while increasingly seeing demand from the international market as well. It is exported to China, Taiwan, Italy, Japan, Spain, Poland, Germany, the US, France, Belgium, Sweden, Thailand and Vietnam.

However, challenges for the industry linger as the world price for coffee has dropped considerably over the past few months.

According to the Lao Coffee Association, robusta beans are down from US$2,100 in March to US$2,014 in June.  

The higher grade Arabica have been seeing an even more dramatic dip, previously selling at US$ 3,100 in March before falling to US$2,500 a tonne in June.

The value of coffee exports through the Lao Coffee Association has reached 21,000 tonnes, evaluating at more than US$50 million.

More and more investors from several countries are investing in coffee farms across the country including those from Vietnam, Thailand, the Republic of Korea, Chinese Taiwan, Singapore and India.

One Response to Coffee Giant Dao-Heuang Owes 27 Billion kip to Lao Farmers

  1. Peter Vincent says:

    My wife and I are among the many growers owed money by Dao Huang. In our case, they have paid some of their debt but still owe us approximately $35,000. Upon buying our product, we were issued with I.O.U. slips and promised payment within 10 days; that was back in January. Now, 7 months later, we are still waiting. The small payments we were able to extricate from Dao Huang have kept food on the table and bills paid, but only just. And extricating those payments was like sourcing blood from a stone! Small payments were being made from their Paksong office but they have now closed that, returning all staff to their complex closer to Pakse which has naturally made it even more difficult to access someone to request payment, let alone actually receive it.

    A few months ago, the “Vientiane Times” published a story in which the chairman of the Lao Coffee Association was quoted as claiming that the Lao coffee industry was being choked by low prices offered from foreign buyers. He also claimed that Dao Huang were paying growers 17,000 kip per kilo whilst foreign buyers were offering only a fraction of that amount. Both of these claims were patently false and appeared to be a deliberate attempt to garner support for Dao Huang whilst denigrating other buyers (I suspect he is, in fact, on the Dao Huang payroll). The maximum amount offered to growers by Dao Huang this year was 3,600 kip per kilo. Furthermore, once growing costs and harvesting costs are deducted from the 3,600 kip, the growers (especially the small family growers with 1Ha or 2Ha plots) are left with almost nothing. For example, labour costs for harvesting alone amount to around 1,500 kip per kilo.

    The Dao Huang company is without doubt the primary cause for the stagnation of the Lao coffee industry. Their tight-fisted attitude toward growers and their hollow promises of payments combine to form a significant contributor to widespread poverty on the Bolaven Plateau. The Dao Huang company has had a near-monopoly on the industry for far too long. The Lao Government need to step in, force Dao Huang to honour their agreements with the growers, offer raw product prices to growers that conform with world standards and appreciate that without the coffee growers, they are nothing! Maybe Ms Dao Huang ought to think of selling off her “Palace of Versailles” home in Pakse and settle her outstanding bills!

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