Vietnam's coffee production expected to rise 5.6% year-over-year to 27.5 million 60-kg bags in 2013-2014 season; exports expected to strengthen following reduced shipments in 2012/2013, driven partially by stagnating production, low robusta prices: BMI
December 27, 2013
(Business Monitor International ()
– BMI View: We have revised up our coffee production forecasts in Vietnam for the 2012/13 and 2013/14 seasons, due to the fast paced expansion in area cultivated and favourable weather. Coffee exports are likely to strengthen in 2013/14, after stagnating production, low robust a coffee prices and a debt crisis among coffee exporters reduced overseas shipments in 2012/13. Improved supply from Vietnam bolsters our view that international coffee prices will remain relatively low in 2014 and 2015.
We have revised up our coffee production forecasts in Vietnam for the 2012/13 and 2013/14 seasons, as cultivated area has been growing at a faster pace than expected. We now believe output came in at 26.05mn 60kg bags in the 2012/13 season, which ended in September 2013, compared with a previous estimate of 23.45mn bags. In the 2013/14 season, for which the robusta harvest is almost complete, we forecast production to record strong growth of 5.6% year-on-year (y-o-y), reaching 27.5mn bags (compared with a previous estimate of 24.5mn bags). Vietnam's production surplus is likely to swell to 25.5mn bags in 2013/14, compared with the five-year average of 20.0mn bags.
Exports are likely to strengthen in 2013/14, after stagnating production, low robusta prices and a debt crisis among coffee exporters reduced overseas shipments in 2012/13. Exports could reach a record high of 25.1mn bags according to the USDA, up 3.7% y-o-y. Vietnam coffee prices are now trading at a discount compared with front-month NYSE robusta prices (of around US$70/tonne over November-December 2013), which will favour exports in the coming months. Moreover, exports are likely to be strong ahead of the Tet (New Year celebration) at the end of January.
Vietnam Coffee Now At A Discount
Muted Performance Ahead
Second-Month ICE Coffee, USc/lb (Weekly Chart) & RSI (Below)
Improved supply from Vietnam bolsters our view that international coffee prices will remain relatively low in 2014 and 2015. We continue to believe coffee prices will bottom in the next few months, with the USc100/lb level offering strong support. Speculative net positions are close to their lowest levels, limiting further downside for the time being. However, the upside to prices is limited for now, as the global coffee supply is excellent owing to a bumper crop from Brazil and Vietnam and stronger than expected output from Colombia. The weakening of the Brazilian real over the year will also keep coffee prices capped. Our Country Risk team forecasts the Brazilian real to average BRL2.30/US$ in 2014 and BRL2.38/US$ in 2015, compared with BRL2.16/US$ in 2013. Another sharp weakening of the currency would cushion the effect of lower global prices on producer margins, encouraging production.
We see prices averaging higher in the coming years, at USc120/lb in 2014 and USc130/lb in 2015, following weakness in 2013. Global prices below production costs could limit reinvestment in the crop, making trees more vulnerable to disease and weather events. Also, farmers in major producer countries including Brazil, Colombia, Vietnam and Indonesia are likely to consider hoarding in the face of sharply declining profitability.
BMI Vietnam Coffee Production*
ICO Vietnam Production Estimates*
% Of Global Production
% Of Global Exports ()
Vietnam Ending Stocks ()*
Vietnam Ending Stocks (ICO)*
Coffee Area Harvested ('000 ha)
Coffee Yield (tonnes/ha)
BMI Global Coffee Production**
*('000 60kg bags), **(mn 60kg bags). Source:
Vietnamese Coffee Calendar
Note: RH =