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Coffee Harvest in Vietnam to Drop From Record on Dry Weather

October 11, 2012

Coffee Harvest in Vietnam to Tumble From Record on Dry Weather

Coffee cherries grow on a farm in the main coffee-growing area of Dak Lak province in Vietnam. Photographer: Claire Leow/Bloomberg

Coffee production in Vietnam, the world’s biggest grower of the robusta variety used by Nestle SA (NESN) in instant drinks, is poised to decline from a record as dry weather cuts yields, bolstering prices.

The harvest may drop 9.4 percent to 1.45 million metric tons in the season that started Oct. 1 from an all-time high of 1.6 million tons in 2011-2012, according to the median of eight trader and shipper estimates compiled by Bloomberg. That’s less than the 26 million bags (1.56 million tons) estimated by Volcafe Ltd. A bag weighs 132 pounds.

Robusta rallied 16 percent in London this year on rising demand from roasters after arabica beans, favored for specialty drinks such as those made by Starbucks Corp. (SBUX:US), soared to a 14- year high. A smaller harvest in Vietnam may help sustain the rally, potentially raising costs for Nestle, the world’s biggest food company. Consumption of robusta will grow at a faster rate than arabica, Luigi Lavazza SpA said last month.

“There wasn’t much rain this year, so there wasn’t enough water for the trees to develop and for the beans to grow,” said Mai Ky Van, a deputy director at October Coffee-Cocoa One Member Ltd. in Dak Lak province, Vietnam’s biggest growing region. “Coffee output in my area may fall about 20 percent.”

Krong Pak district, where October Coffee-Cocoa is based, is among the largest coffee-growing areas in Dak Lak. Rainfall was 23 percent less than normal in the first nine months of this year, according to the Meteorology and Hydrology Department. The district received 756.1 millimeters from the start of the year to Sept. 30, less than the 986.2 millimeters average, it said.

Early Harvest

“From the end of June, there was less rain, and when it came to July and August, the rainfall amount was much smaller than previous years,” said Nguyen Dai Nguong, head of Dak Lak’s meteorology department.

The prolonged dry period hampered growth of beans and caused some pest attacks and diseases that led to fruits dropping, said Tran Kinh Doanh, who has been growing coffee for more than 20 years. Doanh, also a coffee middleman in Buon Ma Thuot, expects a 20 percent drop in output in his area.

The harvest this year may start 10 to 15 days earlier than usual in Dak Lak, Doanh said. October Coffee-Cocoa started picking beans selectively on Oct. 7, a fortnight earlier than usual, and the main harvest will be in mid-November to early December, according to Van, the deputy director.

The crop may decline 15 percent to 20 percent in 2012-2013 as output typically drops after a bumper crop, Do Ha Nam, deputy chairman of the Vietnam Coffee & Cocoa Association, said Aug. 24. An increase in aging plantations and possible rain storms during harvest may hurt the crop, he said.

Ensuring Demand

Vietnam needs to harvest at least 26 million bags in the marketing season starting this month to ensure supplies of the variety will meet demand, according to Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd. Robusta will account for 46 percent of consumption in 2012-2013, up from 44 percent in 2011-2012, it said.

Robusta for delivery in November rose 0.3 percent to $2,104 a ton today on NYSE Liffe. Arabica for December delivery fell 0.4 percent to $1.628 a pound on ICE Futures U.S. in New York. Robusta’s discount to arabica has shrunk to about 68 cents a pound, from 145 cents at the end of 2011.

Vietnam shipped 75,000 tons in September, according to preliminary data from the General Statistics Office in Hanoi, bringing exports in the first nine months to an estimated 1.34 million tons, up 35 percent from a year earlier. Shipments in the year ended September are estimated at a record 1.6 million tons, according to the GSO.

Robusta is harvested mainly in Asia and parts of Africa, while arabica is grown in Latin America.

To contact Bloomberg News staff for this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net; Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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