CoffeeNetwork (New York) – According to the latest USDA Attache report, Vietnam’s marketing year (MY) 2019/2020 coffee production at 30.5 million bags, up slightly (about 100,000 bags) over MY18/19, due to good weather. Post forecasts MY19/20 bean exports at 25.5 million bags, consistent with the MY18/19 USDA official number. Post forecasts MY18/19 and MY19/20 ending stocks up on low prices.
MY19/20 Crop (beginning October 2019) Generally attributed to El Nińo, the temperature in the early part of CY19 was very hot and dry, forcing farmers to use more water to support their trees during the flowering stage. However, the hot and dry weather was also beneficial, as disparate temperatures between day and night promoted blossoming and led to easier pollination. The rainy season was slightly delayed, but adequate. Together with reservoir water, the rains were enough to supply the trees at the latter stages of coffee production.
Post forecasts total MY19/20 production at 30.5 million 60 kg bags, slightly higher than 30.4 million bags estimated in MY18/19.
With black pepper prices falling continuously over the past three years, farmers are no longer moving from coffee to pepper. However, the new trend is that farmers are trying to maximize their income by inter-cropping fruit trees in coffee plantations. Coffee is still the key cash crop, but durian, passion fruit, mango, and avocado can tremendously increase farmers’ income. Therefore, Post forecasts that Robusta production area will not change significantly in MY19/20.
Arabica production accounts for only 4-5 percent of Vietnam’s total coffee production and its planted area accounts for about 6 percent of the total area. Arabica trees can only produce good cherries if they grow at least 1,000 meters above sea level. In Vietnam, these areas are usually in remote regions with ethnic minority populations. Therefore, the expansion of Arabica production faces difficulties in term of transportation, warehousing, and processing. Post forecasts that both Arabica production and planted area will remain steady in MY19/20 as compared to the previous year.
In MY19/20, Post forecasts that domestic consumption will increase to 3.4 million bags, on the strength of roasted and ground coffee, which forecast at 3 million bags, or about 10 percent of total coffee production. The expansion is due to the continuing proliferation of coffee shops and cafes from both international franchises and local Vietnamese brands. The domestic coffee market has fierce competition with well-known foreign coffee brands such as Dunkin Donuts, Coffee Beans and Tea Leaves, Gloria Jeans, My Life Coffee, McCafe, PJ’s, and Coffee Bene competing against each other and with local chains, such as Trung Nguyen, Phuc Long, Highlands, Coffee House, Coffee Factory, and King Coffee. Vietnamese coffee drinkers prefer roasted and ground coffee for its full-bodied flavors, and many chains are developing specialty and value-added coffee products to stand out in the competitive market.
Post estimates Vietnam’s MY19/20 total coffee exports, including green beans, roasted and ground, and instant coffee, at 28.3 million bags. This is due to high ending stocks, expected relatively good production, and higher green bean exports.
Green Bean Exports
In MY19/20, Post forecasts Vietnam’s exports at about 25.5 million bags of green coffee beans, consistent with the official MY18/19 USDA estimate, on large carry-over stocks and expected good bean production. For MY18/19, Post estimates that the export volume will drop about 4 percent from the USDA official number of 25.5 million bags to 24.5 million bags, due to current weak export demand and expected better production from Brazilian conilon, which strongly competes with Vietnamese Robusta, from now until the end of marketing year. These dynamics will also increase carry-over stocks in MY18/19.
Soluble and Roasted Exports
Post forecasts slight growth in soluble and roasted coffee exports, at about 5 percent and 10 percent, respectively, over MY18/19. Roasted coffee is cheap to produce, and therefore is attracting more investment in Vietnam. For example, Nestle, a giant player in soluble coffee, recently introduced roasted coffee under the “Nestle Vietnam” label.
Vietnam continues to import small quantities of green coffee beans, as well as roasted and instant coffee from Laos, Indonesia, Brazil, and the United States. Vietnam’s imports of roasted and ground coffee from the United States have increased recently due to the expanding coffee retail sector. Post forecasts total coffee imports in MY19/20 up slightly, about 50,000 bags, to 1.21 million bags of Green Bean Equivalent (GBE), due to the aforementioned expansion of café and coffee shops in Vietnam. Of the total, about 160,000 bags GBE are soluble coffee, 550,000 bags GBE are roast and ground, and 500,000 bags are green bean imports.
According to traders, by the end of March 2019, overall coffee stocks were already higher than in MY17/18. With Post’s lower estimated export volume in MY18/19, the available stocks will be very high, or about three times higher, than MY17/18. Post forecasts that MY19/20 ending stocks will be also at high levels due to increased carryover stock from MY18/19 and expected good production. Farmers have noted that they expect prices will recover in the coming crop, though industry again cites the Brazilian conilon crop as a variable.
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