Vietnam to raise coffee output, despite drought

Coffee production in Vietnam, the world's second-larger producer, will rise by 7.0% this year despite a prolonged dry season, which left parts of the country with its worst drought in a century.

Output will rebound due to 18.7m bags, or 1.12m tonnes, in 2010-11, after being dented last year by torrential rains during both flower and harvesting seasons in the main Dak Lak and Lam Dong growing districts in the south of the country.

While plantations were this time being dogged by a shortfall of rain since November, this has "fortunately not caused a substantial effect on coffee production", a report from US Department of Agriculture staff in Hanoi said.

"Growers are reporting that most coffee trees have good fruit setting and development of the cherries on their branches at this point in the growing season."

Rains on their way? 

Dak Lak officials have reported only 2,500 hectares of plantations damaged by drought. Vietnam's overall plantings exceed 530,000 hectares.

Furthermore, weather forecasters have predicted some rain, with scattered showers expected "near coffee areas" this week, favouring "flowering and early development of coffee, after the recent dry weather", according to DTN Meteorlogix.

Earlier this year, parts of the country reported their driest dry season in at least 100 years, with water levels in the Red River falling to their lowest since records began in 1902.

Lack of guidance 

The USDA bureau report also affirmed doubts over a government-backed stockpiling programme, aimed at shoring up local prices which have fallen in line with those in London, the main market for the robusta beans which account for nearly all Vietnam's production.

Vietnam coffee forecasts, 2010-11 (year-on-year change)

Arabica output: 480,000 bags (+6.7%)

Robusta output: 18.25m bags (+7.1%)

Total exports: 16.83m bags (unchanged)

Domestic use: 1.25m bags (+4.2%)

Year-end stocks: 2.51m bags (+43%)

Source: USDA attache report

"According to contacts from the Vietnamese coffee industry, this stockpiling plan will be implemented slowly because as of yet there are no detailed guidelines… on how to implement the scheme," the report said, citing uncertainty in particular over support for loans to back bean purchases.

Nonetheless, many in the industry believe the scheme has the potential for increasing Vietnam's ability to influence prices, with the country holding believed to hold only about 5% of world coffee stocks, way below its 15% share of production.

The briefing forecast inventories jumping by more than 40% over the year. 

Robusta beans for July delivery closed unchanged at $1,330 a tonne in London.

July arabica beans, which account for only about 3% of Vietnam's crop, ended 0.4% higher at 132.75 cents a pound in New York.

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