Vietnam 2010/11 coffee output to be stable-exporter

Vietnam’s 2010/2011 coffee crop will be little changed from the latest harvest as lower investment by farmers due to weak prices will hurt yields, a major exporter said on Friday.

Vietnam’s 2009/2010 harvest is put at around 18 million bags, about 1.5 million bags short of the previous crop. The growth cycle of coffee trees usually means small crops are followed the next year by harvests up to 20 percent bigger.

“I fear that the next crop’s output may be down because lower prices this year have meant farmers have invested less in production,” said Le Duc Thong, chairman and general director of Simexco Daklak Ltd, one of Vietnam’s top five coffee exporters.

“From our own surveys, we have seen that farmers’ investment is limited in the use of fertiliser and tree care, which will result in lower yields, while the next harvest should have been larger after a drop in the current crop,” Thong said in his office in the main city of Daklak, Vietnam’s largest coffee growing province.

As a result, he said, “the next crop output will be on par, more or less, with the latest harvest.”

The coffee crop year in Vietnam, the world’s second-largest producer after Brazil, runs from October to September.

The country normally exports between 1 million and 1.1 million tonnes a year but a 20 percent fall in output in the latest harvest ending in January meant coffee exports in 2009/2010 could be down to 950,000 tonnes (15.83 million 60-kg bags).

London robusta futures hit an eight-month low in late February but a series of defaults and delays in Vietnam in recent months involving a fifth of output have triggered a rise in prices.

Simexco, which was established in 1994 and is owned by the Daklak chapter of the ruling Communist Party, did not face any problems with delays and defaults thanks to its buying network in three provinces of the Central Highlands coffee belt, Thong said.

In the Mekong Delta in southern Vietnam, salination due to severe dryness had affected agricultural production, but the weather in the Central Highlands has been favourable for coffee, he added.

Simexco accounts for up to 10 percent of Vietnam’s annual coffee exports, with shipments of around 80,000 tonnes a year, and Thong said the firm would aim to maintain that volume in 2010, given its limited processing and funding resources.

DIFFERENT MODEL

In the past three years Simexco has strived to sell its coffee directly to major roasters in Europe and the United States rather than work through trading houses. Thong said the firm’s buyers were in 58 countries.

Foreign companies can now open wholly owned businesses in Vietnam and buy coffee beans directly from farmers so Simexco would struggle to be profitable if it went through trading firms, Thong said.

“It is the right strategy for Vietnam’s coffee sector to develop direct links with farmers and sell directly to roasters,” the 33-year veteran of the coffee business said of the model, which he said only a few exporters pursued.

Vietnam has more than 140 coffee export companies. Most are members of the Vietnam Coffee and Cocoa Association, but they operate independently, making it hard to implement industry-wide policies, such as price floors used in the past.

Thong said he would like to see better coordination between exporters to avoid the situation where they all scramble to buy and flood the world market with cheap beans at the start of the crop year, pushing down prices.

He did not expect the number of exporters to shrink much even if some small companies were eliminated by market competition.

“We see a younger generation running young companies which will be capable of expanding their market share and selling directly to roasters,” he said.

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Posted by VBN on Apr 2 2010. Filed under Agriculture. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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