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Coffee price gains seen lifting Vietnamese sales to 4-yr high

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The lengthening coffee price rally is likely to have prompted growers in Vietnam, the biggest producer of robusta beans, to sell the largest portion of their crop in four years.

[HANOI] The lengthening coffee price rally is likely to have prompted growers in Vietnam, the biggest producer of robusta beans, to sell the largest portion of their crop in four years.

Vietnamese farmers sold 86 per cent of the crop produced so far in the 2015-16 season at the end of June, according to the median estimate in a Bloomberg News survey of six traders. That would be the most since 2011-12 and compares with 70 per cent at the same stage last harvest.

Robusta, used to make instant coffee, capped a fifth monthly rise in June in the longest such run since 2014 as El Nino-induced drought crimped supply. Exports from Vietnam in the first half this year jumped 40 per cent to 987,000 metric tons from a year earlier, statistics office data show.

"Prices continued to rise last month so sales were progressing very well," said Phan Hung Anh, deputy director of Anh Minh Co, a coffee trader in Dak Lak.

Futures slipped 0.6 per cent to US$1,749 a metric ton on ICE Futures Europe on Wednesday after the most-active contract touched a one-year high of US$1,773 on July 4.

Output in the season starting October is still forecast at a four-year low of 1.5 million tons, the survey shows. The next harvest will be impacted by "very dry weather from the end of October until mid-May" said Alexander Gruber, director and chief representative of RCMA Asia Pte Ltd's Vietnam office.

July rainfall in the Central Highlands, the country's coffee belt producing about 90 per cent of the crop, is forecast to be 15 to 30 per cent below historical averages, according to the National Center for Hydro-Meteorological Forecasting.

"We also have to keep in mind that more and more farmers are planting pepper in between coffee as it pays much higher," Mr Gruber said. So while the acreage will stay the same, coffee yields will go down, he said. Local pepper prices are about four times higher than robusta.

Unsold stocks held by farmers at the end of June are estimated at 230,000 tons, compared with 480,000 tons a year ago, the survey shows.

BLOOMBERG