Vietnam Coffee Farmers Increase Sales as Harvest Ends

By Nguyen Dieu Tu Uyen

Dec. 23 (Bloomberg) -- Coffee farmers in Vietnam, the biggest producer after Brazil, are selling more of their crops as the harvest nears completion and banks increase credit to traders to purchase stocks from growers.

“It’s easier to buy coffee from farmers these days,” said Bui Hung Manh, head of business department at Tay Nguyen Coffee Investment, Import and Export Co., the nation’s biggest supplier known as Vinacafe Buon Ma Thuot.

An increase in supplies may weigh on prices of the bitter- tasting robusta variety used in instant coffee by Nestle SA and Kraft Foods Inc. Futures have slumped 32 percent since the end of June as world production increased and the credit freeze cooled demand for commodities including coffee.

“We have received offers from local exporters, though the quantity is less than expected,” said Nguyen Ngoc Thu, a trader in Ho Chi Minh City for Madrid-based Icona Cafe, which is among the 10 biggest importers of Vietnamese produce. “Probably the decline in international prices has discouraged them to sell.”

Robusta coffee for March delivery dropped 1.7 percent to $1,603 a metric ton yesterday in London, extending last week’s 2.7 percent decline.

Domestic coffee companies now have more funds to stockpile beans as banks have boosted credit to agricultural businesses, Vinacafe’s Manh said. The Bank for Investment & Development of Vietnam, the country’s second-biggest, said yesterday it would give more loans to companies to buy beans and expand warehouses.

Rate Cut

Vietnam’s central bank yesterday cut its key rate by 1.5 percentage points, the most this year, to 8.5 percent to spur lending in an attempt to combat an economic slowdown. The economy may expand next year at the slowest pace since 1999, according to the International Monetary Fund and the Asian Development Bank.

Export prices for February delivery at Ho Chi Minh City port are now around $1,460 to $1,500 per ton, down from $1,700 a year ago, according to Hua Thanh Hong, business manager of the Sept. 2nd Import-Export Co. Prices dropped to 24,500 dong ($1.4) per kilogram in Dak Lak this week, from 28,000 dong in the year-ago period, Hong said. The Dak Lak-based company is among the three biggest Vietnamese coffee exporters.

The harvest is nearing the end in the central province of Dak Lak, the country’s largest growing area, as rains cleared since the start of this month, Manh said. Two weeks of rains in November delayed the picking of berries and hampered efforts to dry the crop. Buon Ma Thuot, capital of Dak Lak, got no rainfall between Dec. 11 and Dec. 21, and may not receive showers in the next 10 days, the provincial weather bureau said yesterday.

“Harvesting is almost finished and the Lunar Tet Holiday is coming next month, prompting farmers to sell more,” Manh said.

Vietnam’s Tet Lunar New Year festival begins Jan. 26.

Production may total 17 million bags, down from a previous estimate of 17.5 million bags to 18 million bags, the Vietnam Coffee and Cocoa Association said earlier this month.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net.