Vietnam makes coffee stockpiling an annual plan

Vietnam, the world’s second-largest coffee producer after Brazil, will stockpile beans every year to help prevent prices from falling, an industry official said today.

Vietnam, the world’s second-largest coffee producer after Brazil, will stockpile beans every year to help prevent prices from falling, an industry official said today.

The Vietnamese coffee industry’s plan to retain up to 500,000 tonnes of beans for six months will significantly reduce the supply from the Southeast Asian country, already the world’s top exporter of robusta variety used for making instant coffee.

“The plan has now won consensus at all ministries and sectors concerned,” chairman Luong Van Tu of the Vietnam Coffee and Cocoa Association, or Vicofa, said after the association met yesterday to review production and assess the 2010/2011 crop harvesting.

“This work will now become regular each year,” he said, referring to the plan which now still requires government approval before banks can start giving funds to coffee exporters for their domestic purchases.

Global coffee prices are now at their highest in many years, with robusta coffee in sight of its two-year high of US$1,975 a tonne and arabica coffee nearing its 13-year high of US$2.0460 a lb on supply concern.

Traders said with Vietnamese coffee prices hitting 25-month highs earlier this week, farmers were encouraged to speed early harvesting in the Central Highlands coffee belt, but the government may delay a final decision on the stockpiling plan.

Earlier this year Vietnam had planned to stockpile 200,000 tonnes of coffee but failed to reach the targeted volume, and domestic businesses only bought about 63,000 tonnes.

Major exporters have proposed that the government allow the stockpiling to start from December, when the harvest reaches its peak and ample supply may push prices down.

Slow trade in Vietnamese coffee in the past month, with sales totalling around 100,000 tonnes, or less than 10% of output, could lead to a buildup in stock when the harvest peaks from late November and prices could crash, an exporter said.

Smaller bean sizes

The country’s coffee association has sought to boost prices by saying output from the upcoming harvest would fall 10%.

Chairman Tu said a 20% fall in output expected in the provinces of Gia Lai and Kontum following a drought earlier this year coupled with smaller bean sizes and the fact that a third of coffee trees are nearing or exceeding their 25-year production life contributed to the decline.

“The harvest will bring in 17 million to 17.5 million bags,” he said, reaffirming his output forecast made last month in London.

Traders say the association’s output forecasts are often underestimated in a bid to inflate prices. Vicofa said Vietnam exported 18.33 million coffee bags in the previous 2009/2010 crop, well below a government figure of 19.91 million bags.

A Reuters poll of 12 Vietnam-based traders earlier this month found the 2010/2011 crop output would rise more than 2% to a median figure of 19.77 million 60-kg bags, from 19.33 million bags harvested in the previous crop.

Vietnam’s coffee crop lasts between October and September.- Reuters

Tags: Vietnam Coffee, Vietnam coffee prices