Vietnamese Coffee Crop Smaller Than Forecast, Tu Says

By Nguyen Dieu Tu Uyen and Claire Leow

Dec. 8 (Bloomberg) -- Vietnam, the world’s biggest coffee grower after Brazil, will harvest 4 percent less than forecast because poor weather earlier this year cut the size of beans, said Luong Van Tu, Vietnam Coffee and Cocoa Association chairman.

The country will produce as little as 17 million bags, down from a previous estimate of 17.5-18 million bags and the same amount as last year, Tu said in an interview. That compares with trade estimates as high as 21 million bags. Each bag weighs 60 kilograms (132 pounds).

A lower crop may help stem the plunge in prices of the bitter-tasting robusta variety used in espresso and in instant coffee by Nestle SA and Kraft Foods Inc. Prices have slumped 32 percent since the end of June as world production increased and the global credit freeze reduced investor demand for commodities.

“I’d put the crop at 1.20-1.25 million tons,” said Jens Nielsen from Singapore-based Oriental Coffee & Commodities Pte. That’s the equivalent of 20-20.8 million bags. The median of a survey of five traders in Ho Chi Minh City was 21 million bags.

Farmers resumed harvesting in the country’s largest growing region after rains cleared, traders and local government officials said last week. About two weeks of prolonged rains interrupted the harvest, delaying the picking of berries and hampering efforts to dry the crop.

Robusta prices are finding support “probably on account of the climatic difficulties delaying the harvesting of the 2008-09 crop in Vietnam,” Nestor Osorio, Executive Director of the International Coffee Organization, said in his November report.

USDA Estimate

Vietnam’s coffee crop will be 19.5 million bags in the 2008-09 marketing year, down from 21.5 million estimated in June and compared with 18.3 million the previous year, the U.S. Department of Agriculture said Dec. 5.

The country’s coffee industry cultivates as much as 500,000 hectares (1.2 million acres) with annual production of about 1 million tons, according to data posted on the Ministry of Industry and Trade’s Web site Sept. 9.

World output of robusta and the milder-tasting arabica in all exporting countries is expected to be 132.5 million bags in 2008-09, up from 115.4 million bags the previous year, the ICO said. Consumption in 2008 is estimated at 128 million bags, up from 125 million in 2007 “despite the current economic crisis,” it said.

“No significant surplus on the market is likely to be created since it will be used to reconstitute stocks as well as to respond to requirements for domestic consumption and exports,” the ICO added.

Smaller Beans

The Vietnamese coffee crop in 2009-10 may be even smaller as trees recover from stress after two good years, Tu said at the conference today.

Flowering for the next crop, normally in the first quarter or two months after the harvest, may be reduced as some trees are already flowering with the current rains, he said. The rainfall results in larger cherries with smaller beans, he said.

“In some areas, which have already been harvested, recent rains have made the trees flower,” said Le Ngoc Bau, vice director of the Vietnamese Coffee Research Institute. “It’s about two months earlier than normal and will harm the formation of cherries. That will hurt next year’s output.”

Difficulties in getting credit will hurt farmers trying to get fertilizers, which will also affect yield, Tu added.

Robusta coffee for March delivery dropped 0.7 percent to $1,598 a metric ton on Friday in London.

To contact the reporter on this story: Claire Leow at cleow@bloomberg.net;