Coffee exports from Vietnam, the world’s top robusta grower, are set to keep falling as inventories dwindle and slumping prices lead farmers to hoard supplies.
Local growers and middlemen probably held onto 5% of the crop, or 85,000 tons, as of mid-September, according to the median estimate of eight traders surveyed by Bloomberg. Shipments are likely to continue falling through next month, said Le Tien Hung, chief executive officer at Vietnam’s No. 2 exporter Simexco Daklak.
Farmers have been holding onto stocks to avoid selling at a time when prices are trading near a nine-year low. Futures for robusta have slumped about 14% this year due to abundant supplies. Investors are expecting it to get worse, with hedge funds boosting bearish bets on prices to the most on record in data going back to October 2011.
“We dare not to sell more at this point as we may not gather enough supplies,” said Simexco’s Hung. “Several traders have wrestled to fulfill their October contracts.”
Hung expects Vietnam to ship no more than 120,000 tons in September and October. That would be the lowest for the two months since 2011, when exports totaled about 60,000 tons, according to customs data. Meanwhile, Simexco itself will see shipments fall to a low of about 85,000 tons in the season ending this month, down from an average 100,000 tons, Hung said.
Exporters have already seen shipments fall this year, with sales last month dwindling to about 114,000 tons, the lowest for August since 2017, customs data showed. Year-to-date exports through August were down 12% from a year earlier.
The amount of coffee produced in Vietnam had also been on the decline, with the ongoing lower prices encouraging farmers to switch to more profitable crops. Farmers probably reaped 1.71 million tons of green beans in the season that ends September 30, according to the median estimate of 10 traders in the survey, or 90,000 tons less than in the previous crop.
The slump in futures in London has rippled through to Vietnam too, with robusta prices in the country’s coffee belt of Dak Lak province trading at 33,100 dong ($1.43) a kilogram on Friday, down about 13% from last year’s high.
“Local traders currently have to offer a $200 premium over London prices,” said Do Ha Nam, chairman of top shipper Intimex Group and head of Vietnam’s top 20 coffee exporters club. “Farmers will most likely keep their remaining stocks if local prices remain unprofitable.”
Other Key Points:
- Stocks at warehouses nationwide were 260,000 tons as of end-August versus 305,000 tons a year earlier, according to the survey.
- Carry-over stocks are probably at 150,000 tons compared with 262,000 tons a year ago.
- Output for 2019-20 crop, which is expected to be harvested from mid-October, will climb 5% to 1.79 million tons, the median estimate in the survey showed.
- That’s thanks to improved yields; the total production area is on the decline for more profitable crops, Intimex’s Nam said.
- The projected increase in output doesn’t guarantee more beans from Vietnam next year, though.
- “The question is whether farmers will withhold the supply when prices are low,” according to Judith Ganes, president of New York-based J. Ganes Consulting. “Generally, they are better capitalized to do so from diversifying their crops.”
- Vietnam’s 2020 coffee exports are forecast to be about 1.5 million tons, said Nam, who is also vice chairman of Vietnam Coffee-Cocoa Association. “Exports won’t rise unless the robusta beans fetch more than $1,500 a ton in London.”
- Nam sees Intimex’s 2019-20 exports at 450,000 tons, compared with its annual average 500,000 tons.
To contact the reporter on this story: Mai Ngoc Chau in Ho Chi Minh City at cmai9@bloomberg.net
To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Atul Prakash
©2019 Bloomberg L.P.
