BusinessInvestmentsLao EconomyLatest News

Declining Coffee Production In Laos Needs Urgent Attention: LCA

Source: Vientiane Times

The Lao Coffee Association (LCA) is worried about a steep decline in coffee production and a gradual increase in prices of the commodity.

The volume of production is continually decreasing, especially when compared to the figures for the past decade. According to an update unveiled by the LCA, coffee production may drop from 50,000 tonnes a year during 2005-06 to 20,000 tonnes a year in 2022.

The decline in production is worrisome for coffee producers, who fear the trend coffee could continue in the coming years.

Faced with this fresh challenge, the Advisor to the LCA, Mr Sisanouk Sisombath, who is also the President of the Sinouk Group, met media representatives last Friday to provide an update on coffee prices and production in Laos and on the global markets.

International marketing experience to achieve a successful local outcome.
We are Your Marketing Partners in Laos

During the meeting with a media group led by the President of the Lao Journalists’ Association, Mr Savankhone Razamountry, Mr Sisanouk said the price of green coffee has seen a threefold increase when compared to the figures for the past 10 years.

“At the same time, the production of coffee has continued to decline in the local and global markets,” he said, adding there were several reasons for the plunge in production. Climate change and the invasion of insects are among these factors.

Mr Sisanouk said the LCA had recorded coffee production of more than 50,000 tonnes per year during 2005-06, whereas the figure for 2021 was more than 30,000 tonnes.

“In 2022, it is forecast to be only 20,000 tonnes. It is a big shock for the Lao coffee industry to experience such a continuous decline in annual production,” he said.

The price of green coffee (Robusta) in Laos has jumped from 3,200 kip per kg to 9,300 kip per kg due to the decline in production, while the the world’s largest coffee exporters, such as Brazil and Vietnam, also witnessed a decrease in production.

“The prices of Lao coffee are higher than the world prices, which is good for growers to make revenues. But the quality of the coffee bean will be lower when buyers are in a rush to buy beans for their processing factories,” he said.

Mr Sisanouk noted that the rising price of green coffee produces positive results for growers, but it may lead to a loss of the quality for Lao coffee products when growers are in a rush to sell their beans.

In December 2021, coffee prices reached a new multi-year high as the monthly average of the International Coffee Organization (ICO) composite indicator price broke through the 200 US cents/lb mark, averaging 203.06 US cents/lb.

This marked an increase of 4.0 percent when compared to the 195.17 US cents/lb recorded in November 2021.
The price levels during the coffee year 2021-22 have so far marked a return to the higher levels seen in 2011.

As coffee prices continue to increase, intra-day volatility of the ICO composite indicator price increased by 0.6 percentage points to 10.1 percent in December 2021.

Exports of all forms of coffee in November 2021 totalled 9.25 million 60-kg bags, down 12.4 percent in comparison to 10.56 million bags in November 2020.

In the first two month of the coffee year 2021-22, the exports of South America decreased significantly by 24.4 percent to 9.67 million 60-kg bags, as compared to 12.79 million bags in October-November 2020.

Estimates of the total production for coffee year 2020-21 were revised up marginally to 169.66 million 60-kg bags, representing a 0.4 percent increase as compared to 169.00 million bags during the previous coffee year.

Since January 2021, when the ICO composite indicator was at 115.73 US cents/lb, an increase of 75.5 percent has been recorded till December 2021, when the average price reached a decade-long high since September 2011, which averaged 213.04 US cents/lb, according to ICO’s reports.