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Drought-Hit Coffee Area in Vietnam Forecast to Receive Rains

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April 4 (Bloomberg) -- The main coffee region in Vietnam, the biggest producer of the robusta variety used by Nestle SA in instant drinks, may get rain in the first 10 days of April, potentially easing a drought. Prices dropped.

Growing areas in Dak Lak province, which represents about 30 percent of the harvest, will receive 15 millimeters to 25 millimeters through April 10, according to the Meteorology and Hydrology Department. Water levels in rivers and streams will be lower than average in previous years, it said in a report. The government said Feb. 26 that drought would hurt the crop.

Improving weather may push down robusta prices, which dropped 6.8 percent to $2,065 a metric ton from a five-month high in March. Futures will trade from $1,900 to $2,100 a ton this month, Edward Meir, an analyst at INTL FCStone said April 2. The harvest from October will fall at least 10 percent and may drop as much as 30 percent because of dry weather, according to a Bloomberg survey published March 15. Output was 1.44 million tons a year earlier, a separate survey showed.

“Rain helped ease the drought in some areas,” said Nguyen Dai Nguong, head of the meteorology department. “Some districts are still dry and the situation remains difficult.”

Robusta for July delivery fell as much as 1 percent to $2,061 on NYSE Liffe in London today. Futures rose to $2,216 a ton on March 13, the highest since Oct. 3, on concern a smaller crop in Vietnam would cut supplies from Asia where exports from Indonesia, the third-largest shipper, were already falling because of higher domestic consumption.

Rain Needed

Rainfall recorded at 10 stations monitored by the Dak Lak weather office, including one in neighboring Dak Nong province, averaged 15.96 millimeters in the last 11 days of March, the report showed. While that’s more than the 5.75 millimeters in the 10 days through March 20, it’s less than the 37.18 millimeters in the last 11 days of March in 2012, according to the department’s data.

“Rain watered trees and got absorbed into the ground, but was not enough to increase water levels in reservoirs yet,” said Dang Huu Hung, a farmer in Krong Nang district. “Whether it will continue to rain or not, I’ll have to irrigate the trees and put in fertilizer this month to help fruits develop.”

Trees usually flower from January and most would have formed fruit by now, according to growers. Beans in Dak Lak traded at 42,600 dong ($2.04) a kilogram today, up 11 percent this year. Robusta’s discount to the more expensive arabica, brewed by Starbucks Corp., is about 45.23 cents a pound after it shrank 20 percent this year and 61 percent in 2012.

To contact Bloomberg News staff for this story: Ovais Subhani in Singapore at osubhani@bloomberg.net

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

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