Lower coffee prices discourage Vietnam farmer sales

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Coffee farmers in Vietnam were slowing sales of fresh beans as prices remain below the key VND40,000-per-kg level, traders said on Tuesday, underscoring predictions of a drop in export volumes for November.

With around half of this season's crop picked, fresh supplies are plentiful. But foreign buyers are well stocked after Vietnam exported record volumes in 2011/12 season and can afford to wait for lower prices, traders said. Traders and roasters are also well stocked.

"Stocks are now sufficient to cover November and December so only some are buying for January, while others, including major firms, have yet to step in," a trader in Ho Chi Minh City said.

Domestic prices in Vietnam, the world's second-largest producer after Brazil and biggest robusta exporter, have been below VND40,000 per kg, at which farmers often decide to unload stocks, since late October when the harvest gathered pace.

Traders have forecast coffee exports this month at 75,000 to 100,000 tons, or 1.25 million to 1.67 million bags, below an estimated 105,000 tons shipped last month.

Vietnam harvested a record high crop in the 2011/2012 season on higher yields and as new areas became productive, with output now estimated at between 1.65 million and 1.7 million tons, or 27.5-28.3 million 60-kg bags, traders said.

Around 1.6 million tons were shipped in the season ended September and old crop beans were still arriving last month and in November, traders said.

Prices in Daklak, Vietnam's top growing province, dropped to VND37,800-38,200 ($1.81-$1.83) per kg on Tuesday, from VND39,100-39,500 a week ago, tracking a fall in London's robusta futures market overnight.

 January robusta contract eased $3, or 0.16 percent, to settle at $1,898 a ton on Monday, just above Thursday's low of $1,891, the lowest level for the second month since Feb. 8.

 Given thin buying demand, exporters eased their quotations this week, putting the discount to January at $50 a ton, versus $50-$60 a week ago, while bids were seen at $40-$45 a ton.

Half of crop harvested

Farmers in the Central Highlands coffee belt and also in the northern province of Son La have picked half of the 2012/2013 crop, and could finish as early as next month after the rainy season ended earlier than usual, farmers and traders said.

Freshly picked beans have now been dried outdoors thanks to sunny weather in Son La, which produces a variety of arabica and is the largest coffee growing province in Vietnam's north.

The new crop could be 9 percent less than last year's crop, falling to 24.2 million bags as rains above the average hit the flower blossoming period, the US Department of Agriculture attaché in Vietnam said in a report released on Monday.

It forecast arabica output to rise to a record 51,000 tonnes this season, as the planting area continues to expand.

The USDA attaché's forecast is in line with market expectations of a fall of between 6-10 percent due to a natural cycle as trees need to rest after a bumper harvest.

"The weather was not favorable (during the flowering period), so cherries have become smaller than in the last crop," another trader in Ho Chi Minh City said.

His assessment echoed those of farmers and traders in the Central Highlands who spoke with Reuters last week.

The output in Daklak is expected to ease 5-10 percent to between 450,000-465,000 tonnes, according to a provincial agriculture official and a Daklak government report.

Daklak accounts for a third of Vietnam's total output.

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