2015-16 Vietnamese coffee harvest : Every time Brazilian politics take a new twist, a Vietnamese coffee farmer decides whether to sell a bag of coffee. A draw-down in coffee inventories in Vietnam, the world’s second-largest producer, is once again highlighting the close relationship between the volatile Brazilian currency, and exports from a coffee rival on the other side of the world.
Coffee stockpiles held by Vietnamese farms are down 50 per cent from the seasonal average because of a sharp spike in exports in the first half of the year, according to exporters and government statistics.
The bump has been fuelled by farmers taking advantage of a rally fuelled by the appreciation of the Brazilian real on expectations of the impeachment of President Dilma Rousseff.
Farmers in Vietnam now hold only about 10 per cent of their total 2015-16 harvest because of recent sales of beans as the market has rallied, according to Le Hung Anh, CEO of major exporter Minh Anh Coffee, in Dak Lak province, Vietnam’s largest coffee-growing area. In a typical year, farmers would hold back 20 per cent of their harvest at this time, according to Mr Anh.
The current Vietnamese coffee season, which ends in September, is estimated at 1.76 million tonnes, according to the US Department of Agriculture. At current prices, 10 per cent of the current season would be equivalent to roughly $US323 million ($423m). Those low inventories are the result of a 40 per cent boost in exports in the first half of 2016 compared with the same period last year, according to the country’s statistics office.
“Prices were too low at the beginning of the crop year, prompting farmers to hold back their beans, but they have sold a lot over the past two months due to higher prices,” Mr Anh said.
The drop is even sharper compared with last season, which saw farmers hold back large stockpiles of the beans in warehouses and even bedrooms to wait for higher prices. At the same time last year, farmers were holding back an estimated 25 per cent of their beans, according to Mr Anh.
Despite the recent selling, the robusta coffee market, traded in London, has now risen to one-year highs. The continuous contract for robusta is currently up nearly 12 per cent in the past month and 22 per cent since the year began.
Traders and analysts say the smaller, London-traded robusta market has been dragged upward by the New York-traded arabica coffee market. On that market, prices have risen 20 per cent since the start of the year, despite expectations that top producer Brazil will produce a record arabica crop.
That gain is largely due to a 22 per cent appreciation of the Brazilian real versus the US dollar this year on expectations that the country’s president, Dilma Rousseff, will be impeached.
Those twin rallies are one sign of the close relationship between the volatile Brazilian currency and the decisions made by farmers and traders in rival producer Vietnam. (Source : http://www.theaustralian.com.au )
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