/ 18 June 2015

Late rains in Vietnam alleviate coffee fears

Late Rains In Vietnam Alleviate Coffee Fears

Rains in Vietnam’s coffee areas are improving conditions after dry weather and helping farmers apply the first round of fertiliser.

The wet season started 10 to 15 days later than normal in the middle of May, said Nguyen Dai Nguong, head of Dak Lak’s meteorology and hydrology department. Although the downpours have not been as heavy as growers wanted, they brought much-needed moisture, he said.

Water is crucial for helping coffee trees absorb fertiliser so the fruit doesn’t drop off, said farmers in the world’s biggest producer of robusta coffee beans, used by manufacturer Nestlé. Forecaster Commodity Weather Group LLC said last month that production in Vietnam is at most risk from the El Niño weather phenomenon.

The wet weather may curb gains in London futures, which have climbed by 12% from an 18-month low in May.

“Good and regular rains started this past weekend and alleviated the situation over the coffee belt with the exception of Gia Lai province, where rains have been only scattered and overall dry conditions continue,” coffee trader Tong Teik Pte said.

Farmers “feel now more confident that this upcoming crop will be a good one and certainly better than the low past one”, Tong said.

Farmers have been stockpiling beans in anticipation of higher prices. Growers held 35% of this year’s 1.56-million-tonne crop at the end of May, the most since at least 2010, according to a Bloomberg survey this month.

Although El Niño is seen as a threat to the harvest, which starts in October, output is still forecast to reach 1.72-million tonnes, matching the record set in 2013-2014, the survey showed.

“I’m glad plentiful rains came just a few days ago, allowing me to apply fertiliser,” said Huynh Minh Thanh, a farmer in Dak Lak, which grows 30% of the crop. “Before that, rain was little and irregular.”

Although precipitation from January to May in Dak Lak was 30% below normal, rain last month fell short of the average by only 5%, government data shows.

Concerns about small and uneven fruit remain, however.

“The wet season came late this year and the rains are less than normal,” said Mai Ky Van, deputy director at October Coffee-Cocoa One Member, a state-owned plantation company.

“I’m afraid the cherries and the beans will be small.”

Lower rainfall may cause water shortages in the next growing cycle, he said.

The price of the robusta bean variety on ICE Futures Europe has declined 11% in the past 12 months.

Beans traded in Dak Lak province fell 5% to 38 000 dong a kilogram, according to data from the Trade & Tourism Centre. – © Bloomberg