The Standard Chartered Bank (SCB) on April 9 signed an agreement lending 24 million USD to the Daklak September 2nd Import-Export Co. Ltd (Simexco Daklak), the second largest state-owned coffee trader in Vietnam.
Simexco General Director Le Duc Thong said the loan will help the company to achieve its export revenue goal.
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Coffee sales in Vietnam, the biggest grower of robusta beans used by Nestle SA (NESN) in instant drinks, climbed as local prices surged last month and on speculation that rain will ease a drought in the main growing region.
Sales probably reached 1 million metric tons, or 69 percent of the 2012-2013 crop, compared with 70 percent sold a year earlier, according to the median of 11 trader and shipper estimates compiled by Bloomberg. Farmers had sold 57 percent of the harvest, a survey on March 7 showed.
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The coffee harvest in Vietnam, the biggest grower of the robusta variety, may decline in the 2013- 2014 season as a drought in the country’s top producing region may lead to smaller fruits, potentially boosting prices.
Water levels in reservoirs, rivers and streams in the Central Highlands are much lower due to less rainfall last year, Nguyen Dai Nguong, the head of Dak Lak Meteorology and Hydrology Department, said yesterday. Dry conditions are expected to continue this month as the probability of off-season rains is much less than in previous years, he said. The highlands cover five coffee-growing provinces, including Dak Lak, which alone represents about a third of Vietnam’s total production.
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Liffe coffee trades flat. Citi analyst Sterling Smith says the Vietnamese Central Highlands were dry again Wednesday, as the ongoing drought continues to raise concerns about robusta output this season.
He adds robusta supply concerns are also fuelled by growing concerns about Indonesia’s exports this season, which could be 7.6% lower on last year’s levels. March is flat at $2059/ton.
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Write to Neena Rai at neena.rai@wsj.com
By Neena Rai and Vu Trong Khanh
Vietnam’s robusta coffee output this year is expected to fall sharply as a prolonged drought plays havoc in the country’s key coffee growing region, threatening to push prices still higher.
Farmers said they expect the robusta coffee crop this agricultural year, which started in October, to be as much as 20%-25% smaller than the prior year because of dry weather during a critical flowering period for beans. Vietnam is the world’s largest producer of robusta coffee.
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According to the Departments of Agriculture and Rural Development of five provinces in the highlands: Dak Lak, Gia Lai, Kon Tum, Dak Nong, and Lam Dong, up to now, they have finished their harvest. The production decreased over 25% in comparison to the last crop 2011/12.
Coming to the crop 2013/14, the weather is changeable. Two early rains in November 8th, 2012 and December 14th, 2012 while coffee was being harvested made coffee blossoms early. These flowers dropped and were fruitless which weakened coffee trees. Up to now, the new crop starts, 70% coffee area is in drought, some areas lack water. If this disadvantage weather condition lasts long, the coffee production next crop will decrease seriously.
Vietnam’s January coffee exports rose 22.7% in volume and 23.3% in value compared with December, the General Statistics Office said Monday.
The exports totaled 200,000 metric tons, or 3.33 million 60-kilogram bags, valued at $407 million, the GSO said.
The agency revised December coffee exports to 163,000 tons from a previous estimate of 170,000 tons.
In the crop year that began Oct. 1, Vietnam has so far exported 587,000 tons of coffee, up from 371,000 tons during the same period a year earlier.
Vietnam exported 170,000 metric tons of coffee in December, up 39.3% compared with November and up 8.9% from the same month last year, according to government data released Monday.
Revenue from coffee exports totaled $344 million in December, up 31.3% from the previous month, the General Statistics Office said in a statement.
In the crop year that began Oct. 1, Vietnam has so far exported 394,000 tons of coffee, up from 259,000 tons during the same period in 2011-12.
Robusta coffee futures prices are poised to retreat from four-month highs when top producer Vietnam starts selling its beans.
Farmers in Vietnam have been holding back their stocks as they wait for higher prices. Now that futures traded in London are above $2,000 a metric ton, traders and analysts expect the farmers to release their beans into the market soon.
Vietnam is the world’s top robusta producer and the second-largest coffee exporter behind Brazil. Vietnam’s harvest for the year ending Sept. 30 was better than the market had expected, prompting oversupply worries that helped send prices to $1,720 a ton, a 13-month low, in January.
At those prices, farmers chose not to sell. In addition, Luong Van Tu, chairman of the Vietnam Coffee and Cocoa Association, said loans from agricultural banks have been more forthcoming this year, enabling farmers to hold on to their stocks for longer.
As a result, only 40% to 45% of the coffee has been sold, even though the harvest is complete, a Singapore-based trader said.
The current lack of available beans has helped achieve the farmers’ goal. Robusta coffee futures for March delivery rose 1.6%, or $33, to settle at $2,143 a ton Wednesday on the NYSE Liffe exchange, its highest close since Sept. 20. That is a nearly 25% gain from the low seen just weeks ago.
Supporting those gains were trading houses increasing their bets that prices would rise this month.
“The recent rally was purely caused by players on the trading house side—no funds are involved in this,” a London-based dealer said.
Hong-Kong based trader Noble Group and Singapore-based Olam International were unavailable for immediate comment, while U.K.-based Armajaro Trading declined to comment.
“Farmers still hold large stocks of beans in Vietnam and Indonesia, so forward selling will increase,” which will drive futures prices lower, said Keith Flury, senior soft commodities analyst at Rabobank in London.
Robusta is an easier-to-grow coffee variety and is less expensive because its taste is considered to be more bitter than that of arabica.