Exports of Vietnamese Robusta to Hit 6 Year Low

Vietnam might be the largest producer of robusta in the world, but that doesn’t mean all the beans grown in the country’s plantations make it all the way to the export market.

Actually, with fluctuating prices and competition from the currently lucrative pepper industry, Vietnam is facing its lowest number of external sales figures in six years.

According to Do Ha Nam, the CEO of Intimex, a commodity trading company, the total amount of Vietnamese robusta earmarked for export is in the region of 1.1-1.2 million tons.

That would be the lowest recorded figure since 2010.

The main reason for this slump is poor prices. Last year the robusta futures market dropped by around 20%.

As a response, many farmers started to withhold their stock and build up ample reserve supplies that they would release when the market improved.

As you might have gathered, the market has not made significant natural gains to warrant farmers releasing their reserves. The result is that this bottleneck could artificially drive the price up.

As Nam explains, “A [shortage] crisis…could happen in April and May, as there will be little supply.”

At the beginning of the month, the cost of a ton of robusta on ICE Futures Europe was $1,377, around 12% lower than at the turn of the year.

If prices do remain at this level, then it is expected that farming premiums will increase. The current premium is about $30 a ton, but there is talk that this may rise to $50 a ton to encourage farmers to release their coffee to the global market.

However, there is the hope that by stockpiling harvests, a shortage will encourage traders and companies to raise their offers.

There is a worry that in the long term, the Vietnamese coffee industry could enter a sustained decline.

Thanks to the low prices available to farmers, many are switching from coffee to lucrative cash crops, such as pepper.

This is by no means a new phenomenon, but Nam warned that the total amount of land dedicated to coffee farming would drop by 50,000 hectares this year alone.

A stark decrease in anybody’s book.

photo: Miles Tuttle (Creative Commons)