Farmers in Vietnam are holding the biggest unsold coffee inventory in at least five years – months before they’re forecast to harvest a bumper crop.
Growers in the top supplier of robusta used by Nestlé SA held 35 per cent of this year’s 1.56-million-metric-tonne output at the end of May, the most since at least 2010, according to the median of eight trader estimates compiled by Bloomberg. While El Nino is seen as a threat to the next harvest, starting in October, production for now is still forecast to reach 1.72 million tonnes, matching the record in 2013-2014, the survey showed.
Swelling stockpiles may keep pressure on futures that have dropped 10 per cent in London this year and reduce the impact of output losses from the El Nino weather event, which the Australian government expects to intensify. Farmers preferred to stockpile beans rather than sell them as local prices fell to a 16-month low, cutting shipments to the lowest since 2010.
“There’s risk of a big carryover into the next crop because farmers will keep holding back sales if prices stay as low as this,” Phan Hung Anh, deputy director of Dak Lak-based Anh Minh Co., said on 2 June. Sales won’t rise much unless prices recover to about 40,000 dong ($1.83) a kilogram, Anh said.
Beans traded at 37,100 dong after dropping to 34,000 dong on 27 May, according to data from the Trade and Tourism Centre in Dak Lak province. Robusta on ICE Futures Europe slumped to an 18-month low of $1,566 a tonne on 26 May and settled at $1,724.
Unsold reserves were 550,000 tonnes at the end of May, compared with 320,000 tonnes a year earlier, the survey showed. Growers held 48 per cent of the crop at the end of April, Nedcoffee BV said on 18 May. That compares with 42 per cent in a Bloomberg survey.
While exports from Vietnam slumped 40 per cent in the five months through May, according to the Statistics Office, sales have soared from Brazil, the world’s second-biggest grower of robusta. The nation shipped a record 7.1 million bags (426,000 tonnes) in the 12 months through April, from 4.1 million bags a year earlier, according to Rabobank International.
“The timid selling from Vietnamese farmers since the start of the crop in October is in sharp contrast with the wall of Conillons that came from Brazil,” Rabobank analysts including Carlos Mera wrote in a report emailed on 21 May, referring to robusta beans from Brazil.
Vietnamese exports will be significantly lower for the rest of the marketing year if prices do not exceed 40,000 dong, the US Foreign Agricultural Service said last month. Assuming normal weather and rebounding yields, the 2015-2016 harvest may reach 28.67 million bags (1.72 million tonnes), the unit of the Department of Agriculture said in a report.
Bloomberg News, edited by ESM