Vietnam Coffee-Farmers sell more as prices rise

HANOI, April 14 – Coffee sales in Vietnam further strengthened in the past week as farmers sold more stocks of the commodity to exploit higher prices and strong demand from exporters, traders said on Tuesday.

They said domestic prices had risen more than 6 percent in the past month on robust demand from foreign buyers as well as higher London futures prices.

On Tuesday, the industry body Vietnam Coffee Association (Vicofa) said domestic prices in Daklak, Lam Dong and Gia Lai, the country’s largest growing provinces, averaged 24,900 dong-25,000 dong ($1.4-$1.41) per kg, from 24,800 dong on Monday and 23,500 dong a month ago.

Free-on-board prices for spot shipments stood at $1,450 a tonne on Tuesday, up $15 from $1,435 on Monday and $1,430 a tonne a week ago, Vicofa said.

“We expect sales from farmers to stay strong throughout this week as the current price level should encourage them to unload stocks,” a trader in Daklak capital Buon Ma Thuot said.

Traders said discounts to London’s May contract stood at $120 per tonne for spot shipment, making Vietnamese robusta grade 2, 5 percent broken at $1,450 a tonne, free-on-board basis , in line with Vicofa’s reports.

About 5,000 hectares (12,400 acres) of coffee crops in Daklak, Vietnam’s top growing province, are being affected by a severe dryness, state media quoted the provincial government as saying this week.

The six-month dry season is in full swing in Daklak. It often ends late this month or in early May.

Vietnam, the world’s second-largest coffee producer after Brazil, forecast last week its exports of the commodity would be steady at between 900,000 tonnes and 1 million tonnes (15 million-16.7 million bags) this year and in 2010 [ID:nHAN497014].

The coffee crop year runs from October to September but all government reports on production and trade in coffee, 95 percent of which is the robusta variety used for making soluble coffee, are based on the calendar year.

Most of this year’s coffee exports will come from the 2008/2009 harvest that ended in January. Farmers often retain part of the current stock to blend with beans from the next harvest due to start in late October for sales.

The coffee association has revised down nearly 6 percent its estimate of the harvest output, to 16 million bags, from a December figure of 17 million bags.

Vietnam exported 10.08 million bags between last October and March 2009, up 16.2 percent from a year earlier, government statistics show. ($1=17,750 dong)


USDA Attache: Vietnam 2008-09 Coffee Output To Rise 17%

Vietnam’s total coffee production for 2008/2009 is expected to increase by 17%, according to a U.S. Department of Agriculture attache report posted on the Foreign Agricultural Services Web site.

Coffee production in 2007/2008 was about 13.7% less than the previous crop year. Consequently, export volumes were also down 10% from the previous market year.

Vietnam produced 1.1 million metric tons or 18.33 million 60-kilogram bags of coffee in market year (MY) 2007/2008. This represents a 13.7 percent decline in production from the previous crop year, though still 5 percent higher than our earlier forecast. Post maintains its earlier estimate for MY 2008/2009 coffee production at about 21.5 million 60 kg bags or 1.29 million metric tons, which is 17 percent more than the current market year. This improved outlook takes into account an anticipated small increase in the growing area as well as improved weather conditions and better yields.

Even with a 10 percent reduction in coffee export volume in MY 2007/2008, Vietnam remains the world’s top Robusta exporter. This market year also marks the first time exports reached a value of over $2 billion. This 20 percent increase in value over the previous market year was largely due to higher coffee prices. It should be noted, however, that coffee prices are expected to fall during the first months of MY 2008/2009 due to effects from the global financial crisis on commodity markets, including coffee, despite the fact that, as International Coffee Organization (ICO) reports, coffee supply and demand fundamentals remain unchanged. The effects of falling coffee prices are already being felt by Vietnam’s coffee growers, some of which have already started holding more stock as prices continue the sharp decline since July. Post has therefore revised upwards its earlier estimate for ending stocks for market year 2007/2008. PRODUCTION Vietnam’s 2007/2008 Coffee Crop

Post revises Vietnam’s 2007/2008 coffee production estimate to 1.1 million metric tons or 18.3 million 60kg bags. This represents a decrease of 13.7 percent from the previous crop which is largely attributable to loss of coffee blossoming during heavy rainfall as well as unseasonable frost in several key planting areas (Graph 1). Coffee yields for the 2007/2008 crop year was down 14.8 percent from the previous crop year.

Coffee growers continued to expand their production area in the face of high export coffee prices despite of government efforts urging growers to focus on sustainable production techniques and better harvesting practices in order to improve coffee quality. Farmers reportedly spend an average of VND20 million to grow one hectare of coffee. Application of such sustainable cultivation techniques as reasonable use of fertilizer (i.e. correct amt.) and sufficient water, the expense is reduced to VND15-16 million per hectare, a 25 percent cost savings.

The Ministry of Agriculture and Rural Development (MARD) reports that coffee is currently planted in 20 provinces across Vietnam, but the primary plantation areas are in Dak Lak, Lam Dong, Gia Lai, and Daknong provinces in the Central Highlands (picture 1). All but about 2.2 percent of Vietnam’s coffee production is Robusta coffee. Coffee growers note the difficulty in developing Arabica plantation areas, which need to be at an appropriate elevation. Farmers must also change their farming and harvesting/handling techniques to one requiring more intensive labor, which can be quite costly as is the investment needed for processors’ equipment and the higher processing standards required for Arabica beans.

Moreover, all of these factors/requirements have to be in place at the same time in order to have a good marketable Arabica product.