Coffee crop in Vietnam expanding to almost match record

Coffee crop in Vietnam expanding to almost match record

Coffee growers in Vietnam, the biggest producer of robusta beans used by Nestle SA, are set to reap an almost record harvest, providing some relief to a global shortage that’s driven prices to the highest since March.

Output will probably reach 1.69 million metric tons in the year started Oct. 1, according to the median of 10 trader estimates compiled by Bloomberg. That’s more than the 1.65 million tons predicted in a survey last month and compares with 1.71 million tons a year earlier, an all-time high. Unsold reserves with farmers at the end of September totaled about 3 percent of the previous crop, the estimates showed.

Futures jumped 29 percent in London this year on expectations that consumption will exceed supply as drought hurts trees in Brazil, the top producer of the more expensive arabica beans and the second-biggest grower of robusta. Global shortages may persist for the next two years, the International Coffee Organization says. Threats to Vietnam’s crop have faded, said Anh Minh Co., the largest private exporter by volume.

“A few months ago, we still had to worry about factors such as weather, pests and disease,” said Phan Hung Anh, deputy director of Dak Lak-based Anh Minh. “There’s not much uncertainty now, so we can be confident with higher estimates.”

Robusta futures rose to $2,176 a ton on ICE Futures Europe yesterday, the highest close since March. Arabica, the variety favored by Starbucks Corp., has increased 95 percent to $2.1635 a pound this year. The arabica premium to robusta reached $1.226 on Oct. 6, the widest since 2012. Brazil’s National Coffee Council estimates farmers may reap fewer than 40 million bags of 60 kilograms each in 2015 after an 18 percent drop this year, for the longest output slump in five decades.

Robusta Reserves

Farmers in Vietnam had 50,000 tons of unsold inventories at the end of last month, compared with 100,000 tons a year earlier when the crop was 1.5 million tons, the survey shows.

Stockpiles at warehouses in and around Ho Chi Minh City fell 42,000 tons to 192,000 tons at the end of September from a month earlier, according to Tong Teik Pte, a company owned by RCMA Commodities Asia Pte, in an Oct. 1 report.

While reserves are dropping in Vietnam, they are increasing elsewhere. Stockpiles with a valid grading certificate in warehouses monitored by ICE Futures Europe rose 15 percent to 111,670 tons as of Sept. 29 from two weeks earlier.

Rainfall recorded in Dak Lak averaged 310.8 millimeters in August at 10 stations, including one in neighboring Dak Nong province, 63 percent more than last year, according to the Meteorology and Hydrology Department. July rainfall was 400.4 millimeters, more than double the amount a year ago. Dak Lak supplies about 30 percent of the country’s harvest.

Favorable Weather

Dry weather in late September helped farmers pick a small quantity of cherries before the start of the season, Tong Teik said Oct. 1. If weather conditions hold, the first round of harvesting will take place by the end of this month or early next month, the report said.

“Rains this week will help provide adequate soil moisture for late cherry growth across the Central Highlands,” MDA Weather Services in Gaithersburg, Maryland said in a report dated yesterday, referring to Vietnam’s main coffee-growing region, which includes the Dak Lak province.

While the Bloomberg survey shows 2014-2015 production will almost match the record in the previous season, the Vietnam Coffee and Cocoa Association forecasts a smaller crop. Output will drop 10 percent from 1.5 million tons a year earlier, said Do Ha Nam, vice president of Vicofa, as the group is known. Excess rain in Lam Dong province, aging trees and a switch by some farmers to more profitable crops like black pepper, will reduce the harvest, he said in an interview in London Sept. 23.

The global shortfall in robusta beans will be 1.9 million bags in the 12 months from October, according to Volcafe Ltd. The world market, including arabica and robusta, will have a shortage of 8.8 million bags, the most in nine years, from a surplus of 7 million bags a year earlier, the Winterthur, Switzerland-based unit of commodities trader said Sept. 5.

Coffee shortages are expected through 2015-2016, Mauricio Galindo, head of operations at the ICO in London, said Sept. 26.

bloomberg