Far from robust Vietnam coffee crop not an instant worry

Coffee output in Vietnam, the world's top robusta producer, is forecast to decline 10 to 15 percent this year to around 16-18 million bags from a record crop last year, a leading industry official said.

"Last year it was a bumper crop and post that yields usually drop," said Vivek Verma, managing director of Olam International's coffee division. "It could have been worse but high prices encouraged farmers to take good care."

Coffee crops typically move in bi-yearly cycles, with a good harvest followed by smaller one.

A lower crop in Vietnam plus a global deficit of 4 million bags according to a Reuters poll in July, may support London's robusta futures market prices.

But Verma said London robusta futures, which have declined from highs, were expected to trade between $US1600 ($NZ2276) to $US1750 a tonne because of easing global supplies.

"I don't think we will go back to $US1800-$US1900 range very soon now, unless something happens to (the) Brazilian crop or there is major disruption in supplies," he told Reuters in an interview.

November robustas finished $US6 firmer at $US1706 on Friday, well below the day's high of $US1738.

The contract dipped to a three-month low of $US1667 last Friday, weakened partly by turmoil in global financial markets, but has slowly been regaining lost ground this week.

Dealers said speculative buying had helped fuel the earlier rise in prices with some hedge selling noted.

Vietnam's Central Highlands, comprising five provinces, produces up to 90 percent of the country's total coffee output. The yield varies depending on soil quality and underground water reserves, ranging from 1 tonne to 6 tonnes per hectare.

The country's coffee crop year lasts between October and September. It is the world's largest producer of the robusta variety used for making instant coffee.

Verma said global coffee supplies were expected to improve in the coming months with good output from Vietnam and Brazil.

"Everyone is expecting (the) 2008 Brazil crop to be larger. The estimates range anywhere between 50 to 55 million bags," he told Reuters by phone from Singapore. "Vietnam anyway looks like a good crop. We will have a bit of easing up of supplies."

Coffee supplies from Indonesia have slowed down after a decline in global prices, said Manish Dhawan, Olam's senior coffee trader.

He said arrivals dipped to around 2500 tonnes last week from around 10,000 tonnes that usually come into the market at this time of the year.

Indonesia is in the middle of harvesting its coffee crop which is estimated around 440,000 tonnes.

In India, floods in southern Kerala state could damage the coffee crop but the overall impact would be marginal.

"We are hearing of floods in Kerala which produces a quarter of the country's robusta crop," Dhawan said. "In other areas there is no impact, so it should be a marginal."

- Reuters