Nestle provided a purchase price of 17.9 yuan per kilo for coffee beans produced in Yunnan over the 2012 to 2013 purchasing season on Nov. 20, which is the lowest bid in the past five years.

Nestle, as an international company committed to investing in Southwest China, has long been working with the Yunnan government to promote Chinese industry. As a result, the purchasing price offered by Nestle works as the vane for local farmers.

It was reported that the price of 17.9 yuan per kilo is very close to the break-even point for coffee farmers, estimated at about 15 to 16 yuan per kilo. Though coffee farmers can still make a profit, the low purchasing price would probably affect their willingness to plant in the next year, which may hurt the development of the coffee industry in Yunnan, according to Hu Lu, vice secretary general of the Yunnan Coffee Industry Association.

Though the price will float in the following months according to the price offered on the New York coffee futures trading market, local coffee planters have begun worrying about their future.

Yunnan is the largest coffee producer in China, where the annual output is about 26,000 tons, accounting for 90% of the total coffee production in China. Despite the decreasing purchasing price, the planted area in Yunnan Province is expanding.

“The expanding area of coffee farms in Yunnan province shows the optimistic expectations of the government as well as coffee farmers,” said one coffee industry insider. “However, it’s time for them to slow down the speed of expansion and to pay more attention to the quality of the coffee beans, which can help them to stand out in the competition worldwide.”

Source: Morning Whistle Nov 2012

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