Coffee Farmers in Vietnam Accelerate Sales Amid Severe Drought

Coffee growers in Vietnam, the biggest producer of robusta beans, sold beans at the fastest pace in two years to help pay for irrigation amid the worst drought in 30 years.

Growers sold 930,000 metric tons, or 58 percent of the current crop, at the end of March, according to a Bloomberg News survey of seven traders. That’s the fastest pace for the time of year since 62 percent in 2014 and compares with 49 percent a year earlier. This season’s output probably totaled 1.6 million tons, same as last year’s, according to the survey.

Vietnam’s coffee belt is suffering the worst drought since the mid-1980s due to the impact of El Nino, the country’s Coffee and Cocoa Association said last month. Crops in Brazil and Colombia are also being affected by the weather pattern, driving up prices. Robusta, used mainly in instant coffee, rose 6.2 percent in March, the biggest monthly advance since June last year.

“Farmers need to sell beans to cover irrigation costs amid this serious drought,” said Phan Hung Anh, deputy director of Anh Minh Co., a coffee trader based in Dak Lak. The price gains also encouraged sales, he said.

Robusta touched $1,534 a ton on March 23 on ICE Futures Europe, the highest since Jan. 4. Prices gained 1.8 percent to $1,496 a ton on Thursday.

Coffee exports from Vietnam in the first quarter gained 24 percent year on year to 457,000 tons, according to data from the General Statistics Office.

Severe Drought

Rainfall in April in the Central Highlands and the south is forecast to be 50 to 70 percent lower than average, according to an April 1 statement by Vietnam’s National Center for Hydro-Meteorological Forecasting. Average temperatures are likely to be 0.5 to 1 degree Celsius higher than normal with drought and water shortages remaining severe, it said.

Almost 20 percent of the 599 reservoirs used for irrigation in Dak Lak province have dried up, Tuoi Tre reported April 5, with 118 out of action compared with 30 at the same time last year, according to the newspaper.

“There has been scattered rain, but the amount is quite insignificant. High temperatures also make water evaporate faster,” said Anh of Anh Minh Co. “If April is still dry, it will cause a lot more trouble.”

Source: Bloomberg