Vietnam Coffee Growers Continue to Hoard Crops

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HCMC – Hoarding by growers and sliding future prices have driven up Vietnam’s monthly coffee inventories to over three times higher than the previous year. The country is currently the world’s leading exporter of robusta coffee, earning US$3.62 billion from coffee exports in 2014. Vietnam now rivals Brazil in coffee production.

As of the end of August, according to a survey by Bloomberg, it is estimated that Vietnam’s coffee farmers were holding back 320,000 metric tons (~20 percent of the current harvest) – a five-year high. In 2013, growers only held back five percent (90,000 tons) of their crop. Exports are at their lowest levels since 2010, down 30 percent this year as of August. Robusta futures are down 17 percent so far this year (September 8th saw robusta on ICE Futures Europe close at US$1,592 a ton ).

Related Link IconRELATED: Vietnam Leads Global Coffee Production Despite Lower 2015 Harvests

Despite three recent devaluations of the country’s currency, the dong, the price of robusta futures has barely budged, and the prices on offer to farmers continue to remain low. Therefore, the current situation regarding supply does not look set to change in the near future.

The current situation of coffee prices will not be helped by the fact that Brazil and Indonesia (the other two key coffee producing countries) are suffering severe currency problems, which has forced them to push up their export levels. As supply increases on the market, Vietnam’s farmers will see little reason to release their stocks in the face of falling prices.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Tax and Compliance Services

Vietnam has become a key producer of coffee beans due to its favorable climate conditions, lower cost production and recent bumper coffee crops. In recent years, coffee has become one of Vietnam’s key agricultural export products – with 95 percent of output being shipped abroad. Per year, on average, coffee exports from Vietnam bring in around US$3 billion in revenue to the country. According to a survey conducted by Bloomberg, Vietnam’s next harvest has been forecast to amount to 1.72 million tons, slightly higher than the current crop. Germany and the United States are the largest importers of Vietnamese coffee.


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