What led Doi Chaang Coffee to delay payments to farmers for years?

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Doi Chaang Coffee Cited Economic Downturn and Reduced Coffee Sales for Payment Delays

Doi Chaang Coffee has stated that a challenging economic climate and a subsequent impact on its coffee sales led to significant delays in payments to approximately 200 farmers. The company, which previously settled supplier payments within four days, began experiencing payment delays for some suppliers as early as 2017. These delays have prompted the company to pledge repayment of approximately 7 million baht (RM926,620) to the affected growers.
Economic Hardship and Sales Impact

The managing director of Doi Chaang Coffee Original Co., Panachai Pisailert, attributed the payment delays to a "bad economy" over the past two to three years, which in turn affected the company's coffee sales. While the specific market conditions or sales figures are not detailed, this economic downturn is presented as the primary external factor influencing the company's cash flow and ability to meet its financial obligations to suppliers.
Farmers' Financial Strain and Debt Accumulation

As a consequence of the delayed payments, which ranged from 2,000 to 230,000 baht for some farmers since 2017, growers were compelled to seek alternative financing. These farmers resorted to taking out high-interest loans from various sources, including informal lenders, state-owned banks, and village funds, to cover essential expenses for their crops. One farmer reported that a non-payment of 50,000 baht from Doi Chaang forced him into a debt cycle, resulting in a total debt of approximately 300,000 baht to manage his agricultural needs.
Industry Context and Social Enterprise Model

Doi Chaang Coffee operates under the self-proclaimed model of a social enterprise, founded in 2003 with the stated aim of providing growers with fairer prices. The company also indicated that it conducts business in a manner described as "like a family," and notably, does not have written contracts with its suppliers. This operational approach, while intended to foster close relationships, has been highlighted by experts as unusual and potentially making farmers more vulnerable to financial exploitation due to the lack of formal agreements. Coffee cultivation is a crucial income source for the hill tribes in Chiang Rai, many of whom transitioned from opium poppy cultivation to crops like coffee beans in the 1960s.

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What led Doi Chaang Coffee to delay payments to farmers for years?

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