Robusta Harvest in Vietnam's Dak Lak Forecast to Gain, May Help End Rally

Coffee production from Dak Lak in Vietnam, the principal growing region in the world’s largest robusta producer, may increase 5.3 percent after good weather aided flowering, according to the local government.

The harvest may climb to 400,000 metric tons in the crop year from Oct. 1 compared with 380,000 tons this year, according to Nguyen Van Sinh, deputy director of the provincial department for agriculture and rural development. Dak Lak has about 180,000 hectares of coffee, out of Vietnam’s total of 500,000 hectares.

The increase from Dak Lak may help swell global supplies of the variety used in instant drinks and espressos, curbing a rally in prices and widening the discount to arabica. Vietnam’s total production may gain 7 percent in the season from Oct. 1, according to a U.S. Department of Agriculture forecast in June.

“This crop has enjoyed favorable weather during its flowering period, while in the previous crop the trees shed a lot of flowers because of bad weather,” Sinh said by phone today from Buon Ma Thuot, Dak Lak’s provincial capital.

Robusta beans, which represent almost all Vietnam’s output, have advanced 28 percent this year, ending yesterday at $1,654 a ton on the NYSE Liffe exchange in London.

Arabica coffee, favored for specialty beverages, ended at $1.8195 a pound on ICE Futures US, 34 percent higher this year. The surge has made arabica the third-best performer in 2010 on the Standard & Poor’s GSCI Commodity Index.

At those most-recent prices, robusta costs about 75 cents a pound, or $1.07 less than arabica, according to Bloomberg calculations.

‘Very Tight’

Nestor Osorio, the outgoing executive director of the International Coffee Organization, said on Sept. 7 that there was a “a very tight situation between supply and demand” in the global market. Goldman Sachs Group Inc. raised its arabica forecast to $1.80 a pound from $1.55 in a Sept. 17 report.

“Coffee trees had more fruits this year than last year due to favorable weather during flowering,” Huynh Quoc Thich, head of the cultivation office in Dak Lak’s agricultural department, said by phone. “However, we are a bit worried about the size of beans, which may be smaller this year,” he said yesterday.

The Vietnam Coffee and Cocoa Association, known as Vicofa, plans to conduct a field survey in the coming weeks to assess the next crop, Chairman Luong Van Tu said by phone on Sept. 17. The group hasn’t yet made an estimate of production.

‘Whole Country’

“It’s hard to make a prediction now about the output of the whole country,” according to Pham Dinh Khai, director of An Giang Coffee Co.’s branch in Buon Ma Thuot. “We still have one more month to go, and it will depend on how the weather will be,” he said.

Vietnam may produce 20 million bags of robusta in 2010-2011, a gain of about 8 percent, according to an estimate from ABN Amro and VM Group in a report e-mailed on Aug. 31. A bag weighs 60 kilograms (132 pounds). The increase may contribute to a global robusta surplus of 3.61 million bags in 2010-2011 from the 2.98 million bags forecast in May, according to the report.

“In some coffee areas including ours, beans look smaller this year due to a dry spell in the first quarter,” said Cao Van Tu, director of Dak Lak-based Ea Pok Coffee Co. “Rains also came a bit later this year than they used to, causing us to delay putting fertilizer on the trees,” Tu said by phone.

Rainfall in Buon Ma Thuot totaled 107.9 millimeters (4.25 inches) in the first 10 days of this month, compared with 230.3 millimeters in the same period of last year, according to figures from the Dak Lak Hydrology and Meteorology Office.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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