Vietnam coffee supplies face shortage
When Vietnam starts harvesting its coffee crop in two months' time, it could face a dearth of good quality beans because of a high volume of committed shipments and possible delays due to prolonged rains.
The first fresh beans usually arrive in port in November.
Fears of tight supplies in Vietnam, the world's top robusta coffee exporter, have pushed up prices on the London futures market to 6--year highs in recent weeks.
"There would be a shortage of coffee in November if many exporters try to sell for loading that month," said Van Thanh Huy, chairman of the Vietnam Coffee and Cocoa Association.
There were no estimates for the size of shipments in November. Sales of both remaining stocks and fresh beans soared in early July, when domestic prices jumped 7.9 percent to 19,000 dong (HK$9.23) per kilogram, from 17,600 dong in late June.
Prices in Vietnam eased this week to between 20,400 and 20,500 dong per kilogram from last week's peak of 20,600 dong, but the market was quiet on thin stocks.
The London November robusta contract fell 3.2 percent to US$1,345 (HK$10,491) a tonne Monday.
"Everyone, sharing the view of a bumper crop, took the opportunity to sell when prices started rising and many have sold with loading in November and December," a dealer with a foreign trading house in Ho Chi Minh City said.
Farmers begin their four-month harvest in the Central Highlands coffee- growing belt from mid-October, provided the rainy season ends on time. The region produces 80 percent of Vietnam's coffee.
When the weather is dry, it takes seven to 10 days for the new coffee to be picked, dried, bagged and moved to the Saigon Port in Ho Chi Minh City, 300 kilometers southwest of the Central Highlands.
But the rainy season has been in full swing in the region since July and it is uncertain when it will end, traders said, citing delayed shipments and complaints over quality at the start of the 2006 crop. Last year, the rainy season ended in November, a month later than usual, after its arrival was delayed by a drought.
Rains slow the ripening process of coffee cherries and disrupt drying, delaying delivery, while extensive use of small-scale driers causes the quality and taste of beans to deteriorate.
However, before supplies from the coffee belt pick up, exporters can still use the stock carried over from the current crop to blend with early beans from several southern provinces outside the coffee belt for loading.
Cherries often ripen in September in low-lying provinces such as Dong Nai and Binh Phuoc, making small shipments possible from early October, the start of the new crop year.
Vietnam's 2007 crop would rise by a third to between 780,000 tonnes and 950,000 tonnes based on industry and traders' estimates as trees have revived after the drought last year.
Output in 2006 fell 14 percent on the previous crop to 11.5 million 60kg bags, or 690,000 tonnes, the coffee association said. "The remaining stock from the current crop has already been thinning so there might be 20,000 tonnes left when we start the new crop," Huy said.
Reuters - August 16, 2006.
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