Vietnams coffee prices hit highest since late 2011 on lack of good beans

A worker checks coffee beans at a factory in Vietnam's Central Highlands in a file photo. Vietnam's coffee prices edged up this week to the highest since 2011 on a shortage of beans qualified for export processing. Photo by Reuters

Unusual rain resulted in a raw material shortage.

Vietnam's domestic coffee prices edged up this week to the highest since late 2011 on a shortage of beans qualified for exports as the harvest has been hit by rain, traders said.

Unseasonal rain from October to December last year in the Central Highlands coffee belt delayed the 2016/2017 crop harvest, resulting in more black and broken beans, with one exporter saying quality was at its worst since 2008. The rainy season normally ends in early October in Vietnam, the world's top robusta producer and exporter.

Prices rose to a range of VND46,700-47,300 ($2.05-2.08) per kilogram of robusta on Monday in Dak Lak Province, Vietnam's largest coffee growing area, from VND46,500-47,100 last Friday when May robusta futures ended nearly unchanged at $2,184 per ton on London's market. Vietnamese coffee prices closely follow London's futures.

At VND47,300 per kg, prices are the highest since the week ending September 16, 2011 when the beans stood at VND47,400. The bitter beans are used mostly for making instant coffee.

"Nobody is selling, and the raw material is too bad for processing, while there is a lack of export-standard coffee," said a Vietnamese dealer in Buon Ma Thuot, the capital of Dak Lak. The province produces one third of Vietnam's total coffee.

Without using the color sorting machine, the black and broken bean ratio reached 7-8 percent, he said, well above the export standard that requires the defect rate to be at only 5 percent. The dealer declined to be identified by name, but his company has a factory in Dak Lak for processing and exporting robusta beans.

The shortage of export-standard beans has emerged earlier than expected.

Last week Do Ha Nam, general director of Intimex, Vietnam's largest coffee export firm, told VnExpress International that Vietnam could fall short of beans in May or June due to rising shipments and dwindling domestic stocks.

On the other hand, the price hike shows India's ban on the import of Vietnamese coffee in place since March 7 has little impact on Vietnam's market. India often buys Vietnamese robusta grade 3, with 25 percent black and broken beans.

"India has stopped its import, thus raising the volume of Vietnam's low-quality coffee," the Dak Lak-based dealer said, referring to India's ban, which also targets pepper and four other commodities from Vietnam.

India's ban was issued after Vietnam had ruled to suspend the import of India's five commodities for 60 days starting March 1, citing the infection of peanut beetle.

Businesses in both countries have opposed the restrictions, saying the import right should be brought back to avoid negative impact on prices, while cargoes infected by insects should undergo fumigation as usual.

Last Friday the Vietnamese government said it had requested the Indian government to abolish the ban.

A Vietnam Pepper Association official was quoted by a local newspaper as saying amendments to the restrictions would be made after officials from Vietnam's agriculture ministry met with the Indian embassy in Hanoi last Thursday to tackle the issue.

The low-quality coffee beans are estimated to account for 20-30 percent of Vietnam's output in the 2016/2017 harvest that ended in January, well above the ratio of 1-13 percent observed in previous years, the Dak Lak-based dealer said.

"Rain during the harvest has caused early flowering, and which could result in multiple stages of harvesting as cherries will ripe at different time," he said.