Troubles brew for coffee growers

Dong Runqiong, a coffee planter in Pu'er, a city in southwestern Yunnan province named after the famous tea, is feeling the pinch from the plummeting price of coffee beans.

"Coffee beans sell for 20 yuan ($3.2) per kilogram this year, half the price of last year," Dong said.

The price of high-quality Arabica Coffee Futures traded in New York on the Intercontinental Exchange has fallen to around 22 yuan per kg after hitting a decade-high of 41 yuan per kg last May.

The hardest thing for local coffee planters is that Nestle China, the city's biggest bean buyer for many years, has stopped purchasing coffee beans.

Nestle China, the biggest foreign coffee company in China in terms of sales volume, buys one-fifth of Yunnan's coffee beans on average every year and is Pu'er's largest coffee bean buyer.

Yunnan's coffee industry, which began in the 1950s in Pu'er, Dehong, Baoshan and Lincang, accounts for 98 percent of China's coffee bean output. The province's beans are supplied to global giants such as Nestle and Starbucks and domestic brands such as Hogood.

Nestle's previously bustling purchasing office in the city is now quiet, and its blank price board serves to illustrate the plight of the industry.

In a statement on March 31, the company said it had stopped purchasing coffee beans.

Li Sunqiang, from the purchasing office, said all four of its storehouses are fully stocked. And the company cannot purchase any beans before shipping out some inventories.

But Nestle will continue to buy the beans it booked before March 30, he said.

Nestle China's headquarters in Beijing told China Daily its purchase plan for this year has been completed and it would not consider any more purchases before it has space for new inventories.

Xiong Xiangru, head of the Coffee Association of Yunnan, said the price drop was caused by shrinking demand amid global economic woes and fluctuations in the world coffee industry.

Each price cycle in the coffee industry usually lasts about 10 years, with the current one starting in 2003 and peaking in 2011.

The association has organized local coffee companies to buy up the surplus 20,000 tons in Yunnan.

"To avoid a price drop and a glut in supplies, the way out for Yunnan's coffee industry is to extend the coffee industry chain through deep processing and brand building", Xiong added.