Coffee output in Vietnam may reach record on weather, expansion

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Vietnam, the second-largest coffee grower, may produce a record crop in the upcoming harvest as favorable weather and a larger cultivated area boost output in the 2011-2012 season, increasing global supplies.

Production may total 1.32 million tons, according to the median estimate in a Bloomberg survey of 12 traders, growers and exporters. That compares with 1.12 million tons, or 18.7 million, 60-kilogram bags, in the last crop, according to a US Department of Agriculture estimate. For 2011-2012, the USDA has forecast output of 1.24 million tons, which would be an all-time high, according to data stretching back to 1959.

Record production from Vietnam, the largest grower of robusta coffee, used in instant drinks, may boost exports and further lower prices that have shed 24 percent from their peak this year. Coffee has slumped on speculation that supplies may gain even as a slowdown in global growth pares demand.

"A lot of new trees have come into play and the weather has been favorable," Jens Nielsen, founder of Singapore-based Oriental Coffee & Commodities Pte, said in a telephone interview Wednesday. "I am in no doubt we will see a new, record crop."

Robusta futures surged to $2,672 per ton on March 18 on London's NYSE Liffe, the highest level in three years, on concern that availability was constrained. The November-delivery contract fell as much as 3.2 percent to $1,996 Wednesday, the lowest price since July 21, and ended at $2,026.

"˜Rude health'

The survey finding matches the outlook from Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd., which forecast a record Vietnam crop of 22 million bags (1.32 million tons) in 2011-2012, according to a report earlier this month. The report cited a crop "in rude health," with rising output backed by expansion, excellent farm management and good weather.

The harvest in Vietnam may replenish local stockpiles, which are almost depleted after the rally in the initial months of 2011 prompted farmers to sell more of their crop earlier in the year, cutting export volumes in later months. Shipments may been 40,000 tons in August, according to an estimate from Vietnam's General Statistics Office on Aug. 25. That's 49 percent lower than in the same period last year.

"The coffee price has been very good this year, and it may prompt farmers to start picking some coffee early," Nguyen Van An, general director of Thai Hoa Production & Trading Corp., the country's third-biggest exporter, said in a telephone interview. The peak of the crop is likely to come in November, he said.

Largest region

Weather conditions in Dak Lak province, Vietnam's largest coffee-growing region, will be favorable for production over the next ten days, the Dak Lak Hydrology and Meteorology Office said in a Sept. 21 report, with heavy rains at times.

Rain in Buon Ma Thuot, the biggest coffee-growing area in Dak Lak, totaled 1,433 millimeters (56.4 inches) this year, compared with 1,206.5 millimeters in the same period last year, according to figures from the meteorology office.

"There has been a lot of rain in the region and it's very good for the crop at this point," said Bui Hung Manh, head of the business department at Tay Nguyen Coffee Investment, Import and Export Co., the country's biggest shipper. "But if more rains come during the picking period and drying time, then it'll hurt the harvest,"

Vietnam's total area planted to coffee rose 1.8 percent to 548,200 hectares (1.35 million acres) in 2010-2011, the Ministry of Agriculture and Rural Development said on Feb. 9.

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