Coffee Farmers in Vietnam Curbing Sales as Drought Hurts

Photographer: Jeff Holt/Bloomberg

Workers sort through green robusta coffee beans for defects that cannot be removed mechanically, at the Highlands Coffee processing plant in Ho Chi Minh City, Vietnam. Close

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Photographer: Jeff Holt/Bloomberg

Workers sort through green robusta coffee beans for defects that cannot be removed mechanically, at the Highlands Coffee processing plant in Ho Chi Minh City, Vietnam.

Coffee farmers in Vietnam, the world’s biggest producer of the robusta beans used by Nestle SA (NESN) in instant drinks, are limiting sales to seek higher prices amid a drought that may reduce the next harvest.

Sales probably reached 820,000 metric tons, or 57 percent of the crop, less than the 60 percent sold a year earlier, according to the median of 11 trader and shipper estimates compiled by Bloomberg. The harvest that started in October may have dropped 13 percent to 1.43 million tons from a record 1.65 million tons in 2011-2012, the survey shows.

Reduced supplies from Asia may boost robusta prices for a second year. Exports from Indonesia, the third-largest producer, are declining because of increased consumption, a Bloomberg survey showed last month. Global usage of robusta has expanded as demand has fallen for the costlier arabica beans, brewed by Starbucks Corp. (SBUX), says Macquarie Group Ltd. Growth in consumption for instant coffee will top that of the roast- and ground-market from 2012 to 2017, Rabobank International says.

“It’s very difficult to buy beans now as farmers are still holding back sales in anticipation of higher prices,” said Le Tien Hung, Dak Lak-based deputy director of Sept. 2nd Import- Export Co. Dry weather will probably hurt the next crop, so growers are even more hesitant to sell, he said.

Beans in Dak Lak province, which supplies about a third of the crop, cost 42,700 dong ($2.04) a kilogram (2.2 pounds) yesterday, data from the Daklak Trade & Tourism Center show. The price rose to 43,200 dong on March 5, the highest since Oct. 3.

Dry Weather

Water levels at many reservoirs in the central provinces are only at 20 percent to 50 percent of designed capacity, the government said Feb. 26, warning the drought may hurt rice and coffee crops. Farmers irrigate crops by pumping water from reservoirs and wells before the rainy season starts in May.

Drought in the region covering five growing provinces, including Dak Lak, will continue and may become more severe, the National Center for Hydro-Meteorological Forecasting said on its website March 5. Trees in Vietnam usually flower and form fruit between January and March, according to growers.

Exports from Indonesia may decline to a two-year low as increasing domestic consumption erodes supplies from a record harvest, according to a survey published Feb. 28. Shipments will total 450,000 tons in the 12 months starting April 1. That’s 7.4 percent less than sales of 486,000 tons this year, according to U.S. Department of Agriculture data.

Instant Drinks

Global robusta usage rose 11 percent in the 12 months to September as arabica consumption fell 6.2 percent, Macquarie said in January. Instant coffee demand will grow 6.5 percent from 2012 to 2017, more than the 6 percent growth forecast for the roast- and ground-market, J. Ross Colbert, global strategist of beverages at Rabobank, said at a meeting of the International Coffee Organization, or ICO, in London on March 5.

Robusta for delivery in May gained 0.2 percent to $2,118 a ton on NYSE Liffe in London by 5:16 p.m. Singapore time, extending this year’s advance to 10 percent. Prices climbed 6.3 percent in 2012 as roasters increased consumption of the beans. Arabica for May fell 0.3 percent to $1.409 a pound on ICE Futures U.S. in New York.

Robusta’s discount to arabica was 44.83 cents a pound, down 21 percent this year after a 61 percent plunge in 2012. The cheaper variety is harvested mainly in Asia and parts of Africa, while arabica is grown in Latin America.

Harvests in Asia climbed 13 percent to 41 million bags of 60 kilograms each in 2011-2012, according to the annual report of the ICO, an intergovernmental organization with 44 members. The region represented 30.5 percent of global output, it said.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

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

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