Vietnam coffee supply may tighten after farmers sell 90pct of crop

Coffee supplies from Vietnam, the largest robusta grower, may tighten before the next harvest starts in October after surging prices spurred farmers to sell 90 percent of the current crop.

Farmers hold 113,000 metric tons of the 2010-2011 crop, according to the median estimate of a Bloomberg survey of 12 exporters, traders and growers. That compares with about 200,000 tons this time last year. The unsold coffee is held by the wealthiest growers, who can afford to retain stocks hoping prices will rise further, said Nguyen Van An, general director of Thai Hoa Production & Trading Corp., the country’s third- biggest exporter.

Tighter supplies may extend a rally in prices, raising costs for Nestle SA and Kraft Foods Inc., the two biggest coffee buyers, which use robusta beans to make instant drinks. Robusta futures in London have jumped 91 percent in the past year, climbing to a three-year high of $2,672 a ton on March 18, as adverse weather threatened crops in Vietnam and Colombia, prompting Kraft to raise the cost of many of its products.

“We could end up with a very low carry-over at the start of the new crop in October, provide the selling policy is maintained at the same pace,” Herve Touraine, executive director of Hong Kong-based trading company SW Commodities Ltd., said in an e-mailed report yesterday. “This will provide for some tightening in the robusta market, particularly in the context of rising demand pressures.”

Rallying prices

Rallying prices prompted Vietnamese farmers to boost sales in the first few months of this year, Luong Van Tu, chairman of the Vietnam Coffee & Cocoa Association, said last month.

Shipments in the first four months of 2011 jumped about 37 percent to 650,000 tons, according to preliminary data from the General Statistics Office in Hanoi published April 27. Exports in the first six months of the 2010-2011 crop year started October expanded 12 percent to 8.6 million bags, according to the International Coffee Organization.

Coffee prices in Dak Lak, Vietnam’s main growing region, rose to 50,300 dong ($2.43) a kilo today, the highest since at least 2006, according to data from the Dak Lak Trade and Tourism Center compiled by Bloomberg.

Accelerated sales in the first three months of this year may mean exports decline in the second quarter, Tu said on April 27.

Vietnam will produce 18.5 million bags in the current crop year, the International Coffee Organization estimates. A bag weighs about 132 pounds, or 60 kilograms.

Vietnam’s coffee farmers typically begin harvesting cherries in October. Most output is exported, with the U.S. and Germany the biggest markets in 2010, according to the General Statistics Office.

Robusta inventories in European warehouses monitored by NYSE Liffe expanded 35 percent in the past two months, exchange data showed May 19. – Bloomberg

Posted by VBN on May 25 2011. 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