Bloomberg News

Robusta Crop in Vietnam Seen at Two-Year High as Drought Ends

May 09, 2013

The coffee harvest in Vietnam, the largest grower of robusta beans used by Nestle SA (NESN) in instant drinks, will probably increase to the highest level in two years as rain this month ended drought in the main producing region.

Production may advance 4.9 percent to 1.5 million metric tons in the 12 months starting October from 1.43 million tons a year earlier, according to the median of 10 trader and shipper estimates compiled by Bloomberg. That would be the highest since a record 1.65 million tons in 2011-2012. The harvest had been forecast to drop as much as 30 percent to an eight-year low because of the drought in Dak Lak province that represents about 30 percent of output, a survey published March 15 showed.

Prospects for a bigger crop in Vietnam could extend a decline in futures from a five-month high in March by boosting supplies from farmers who may still have about 25 percent of the previous crop in storage. While rains in the country have tempered concern about production losses from the drought, global supplies of the beans will trail demand this year, Rabobank International said in a report last month.

“There’s regular rain now,” said Mai Ky Van, deputy director at October Coffee-Cocoa One Member Ltd. Without the drought the crop would have been bigger, he said. Trees usually flower from January to March, when dry conditions prevailed, and fruits are developing now, growers say.

The Central Highlands region, which includes Dak Lak province, may get more rainfall this month than average, the National Center for Hydro-Meteorological Forecasting said in a May 1 statement. Buon Ma Thuot, the capital of Dak Lak, may receive as much as 300 millimeters (12 inches), compared with the 30-year average of 226 millimeters, it said.

Rain Forecasts

“The drought has ended now as 90 percent of the province has enough water for agriculture,” said Nguyen Dai Nguong, head of the Dak Lak weather office. Drought also ended in Gia Lai, another province in the coffee belt, according to the Central Highlands Meteorology and Hydrology Station website.

Robusta futures on NYSE Liffe in London traded at $2,002 a ton at 5:10 p.m. yesterday in Singapore, down 9.7 percent from the intraday high on March 13. Prices are still 4.1 percent higher this year after a 6.3 percent gain in 2012.

“Prices have eased over the past month as concerns about dry conditions recede,” Rabobank analysts led by Luke Chandler wrote in the report e-mailed April 17. “Given our tight fundamental outlook we continue to see price risk skewed to the upside,” they said. Demand will outpace supply by 300,000 bags of 60 kilograms (132 pounds) each in 2013-2014, the bank says.

Price Declines

Rabobank, which estimates that Vietnam will produce 26 million bags (1.56 million tons), forecasts prices in London to average $2,125 a ton in the third quarter before falling to an average of $2,100 in the last three months of the year. The country’s production probably dropped 13 percent to 1.44 million tons in 2012-2013 from a year earlier, according to a Bloomberg survey published April 5.

In Dak Lak, the beans cost 41,700 dong ($1.99) a kilogram yesterday, data from the Daklak Trade & Tourism Center show. That was down 8.4 percent from 45,500 dong on March 11, the highest level since September 2011.

Farmers may have sold 75 percent of the current crop, similar to the level a year earlier, according to the Bloomberg survey of traders and shippers. Exports from October to April are estimated at 973,000 tons, compared with 959,000 tons in the same period a year ago, according to Bloomberg calculation of preliminary data from the General Statistics Office.

Robusta’s discount to the more expensive arabica beans, brewed by specialty companies including Starbucks Corp. (SBUX:US), was about 52.74 cents per pound yesterday, compared with a four-year low of 35.35 cents in March.

To contact Bloomberg News staff for this story: 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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