The major coffee growing region in Vietnam, the biggest grower of the robusta beans used by Nestle SA in instant drinks, is set for an early start to the wet season, easing a drought that threatens the crop. Futures fell.
The rainy period, which typically begins May 5 to May 10, will probably arrive 10 to 15 days sooner, said Nguyen Dai Nguong, head of the Meteorology and Hydrology Department in Dak Lak province, which represents about 30 percent of the harvest. While rainfall increased in the past month, precipitation is lower than last year, the department's data show. The government said Feb. 26 that the drought would hurt the crop.
Improving weather conditions in Vietnam could pressure robusta prices, which touched a five-month high in March. The drought may cut the harvest starting October by as much as 30 percent, according to a Bloomberg survey published March 15. Beans will trade from $1,900 to $2,100 a metric ton this month as crop prospects improve in the country, Edward Meir, an analyst at INTL FCStone said April 2. Trees usually flower from January to March and fruits are developing now, growers say.
"The wet season will come sooner than usual, and the amount of rain early in the season will be more than the average over many previous years," Nguong said by phone on April 12. "The issue of the drought will be resolved late this month."
Robusta for July delivery dropped for the first time in three days, falling 0.9 percent to $2,050 a ton on NYSE Liffe in London at 4:32 p.m. Singapore time. Futures reached $2,216 on March 13, the highest since Oct. 3, on concern a smaller crop in Vietnam would cut supplies from Asia where exports from Indonesia, the third-largest shipper, are falling because of higher domestic demand.
Rainfall recorded at 10 stations monitored by the Dak Lak weather office, including one in neighboring Dak Nong province, averaged 43.49 millimeters in the period from March 11 to April 10, according to the department's data. That's less than 165.36 millimeters recorded in the same period last year.
"There has been rain but only scattered, and it's still quite sunny," said Nguyen Xuan Thai, general director of Dak Lak-Thang Loi Coffee One Member Ltd. When the rainy season comes, the situation may improve, he said.
Beans in Dak Lak traded at 42,200 dong ($2.02) a kilogram on April 12, up 10 percent this year. Robusta's discount to the more expensive arabica beans, brewed by Starbucks Corp., was about 43.81 cents a pound, shrinking 24 percent this year after 61 percent in 2012.