Vietnam’s coffee harvest will fall short of earlier expectations, curtailed some traders believe by farmers scrimping on applications of high-priced fertilizers – although exports will remain firm.
Hopes have run high for most of the year coffee output in Vietnam, the top producer of robusta beans, after early rains assured a strong blossoming, and benefited cherry setting and growth.
However, the persistence of the rainfall into the harvest period, and forecasts for more to come, “have raised concerns that wet weather could negatively affect coffee picking and drying in the Central Highlands”, the key growing area, the US Department of Agriculture’s Hanoi bureau said.
Furthermore, yields have come in below year-ago levels, with traders reporting too “smaller bean sizes and lower cherry survival rates”.
‘Reduced application of fertilizers’
Some observers have attributed this disappointment to an “off-year” effect, better known for arabica crops in the likes of Brazil, which reports alternate years of higher and lower harvest years, a reflection of tree stress induced by the high-production seasons.
However, others attribute it to “the reduced application of fertilizers because of high prices,” the bureau said.
Vietnam’s fertilizer imports fell by 29% year on year in the first nine months of 2022, although rising 12% by value, official data show.
“Fertilizer imports from China and Russia, Vietnam’s two largest suppliers, declined by 27% and 42% respectively,” the bureau said, noting that retail prices of fertilizers as of September stood 40-50% above year-ago levels, and were even higher in the first half of this year.
‘Priced at a discount’
The bureau downgraded its estimate for Vietnam’s 2022-23 coffee output to 30.22m bags, nearly 700,000 bags below the official USDA forecast.
Of this, 29.20m bags are robusta coffee, a drop of nearly 1.3m bags year on year.
Separately, Rabobank pegged the crop at 30m bags, saying that Vietnam’s coffee farmers “are not benefitting as much from high prices” as some peers, given that robusta prices had not risen as significantly as arabica ones during the rally which has lasted for most of 2022.
Vietnamese robusta prices have even underperformed those of robusta coffee in Brazil, where values have been buoyed by strong domestic demand, including from manufacturers of soluble coffee. Brazil’s robusta coffee exports last month tumbled to their lowest in more than four years.
“Vietnam robusta has priced at a discount compared with Brazil conillon and some African robusta sources over the past year,” the USDA bureau said.
‘Will benefit exports’
This discount would nonetheless be reflected in trade, with the bureau foreseeing that it “will benefit exports in coming months”.
The bureau lifted its forecast for Vietnam’s coffee shipments in 2022-23, as started last month, to 27.65m bags – only 50,000 bags short of last season’s bumper level.
A fall of some 9% in the value of the dong against the dollar will also encourage shipments, in making Vietnam’s exports more competitive.
The briefing follows customs data showing that Vietnam’s coffee exports in October, the first month of 2022-23, fell by 22% year on year to 79,833 tonnes (1.33m bags).
The decline was attributed to a run-down in stocks prompted by the strong shipments of the previous season. The quantity of inventories in bonded warehouses as of the close of 2021-22, at some 40,000 tonnes, shrank by 70% year on year.