Usda gain report /Vietnam – Production to increase almost 38% in 2006/07

Washington – According to the Gain Report issued last week by the USDA Foreign Agricultural Service, Vietnam’s coffee production for 2006/07 is expected to increase almost 38 percent over the previous crop year due to more favourable growing conditions and better yields. Exports for 2006/2007 are also projected to reach record levels. Farmers continue to expand their Robusta production area, spurred on by current high export prices.

Production Production for 2006/2007 is projected to reach 1.116 million metric tons or 18.6 million 60-kg-bags. This represents an increase in production of 5.1 million bags (+38%) that can be attributed to more favourable weather, higher yields, and later cultivations coming to maturity. The figures indicate record outputs and a 38 percent increase over the last crop year. Production for CY 2007/2008 is forecast to decline by 5 percent to around 17.67 million 60 kg bags due to expected dryer conditions.

Although the government continues to encourage farmers in marginal growing areas to replace coffee with alternative crops, growers continue to expand their Robusta cultivation, and where possible, also Arabica, spurred on by current high export prices. Estimates say that coffee production area should increase by about 4 percent in 2006/2007. This would lead to an overall increase of 5.5 percent in the total tree population due to more of the higher-density Arabica plants and a larger planting area for Robusta.

Exports Coffee exports for 2006/2007 are projected to increase significantly over the previous market year. Preliminary data for the first six months of the market year already show record volumes and values. Total exports are expected to reach 17.6 million 60 kg bags or a

36 percent increase over the previous market year.

2007/08 Crop According to the report, coffee production will be about 5 percent less in 2007/2008 because of a possible summer drought or dry conditions in the major coffee growing areas. No official forecast has yet been made for 2007/2008 production. Vicofa notes that an increasing number of coffee trees are getting older, but the potential impact is still limited.

Domestic consumption The report confirms its previous estimate of 858 thousand 60-kg bags or 51.5 thousand metric tons (tmt) green equivalent for Vietnam’s 2006/2007 domestic consumption. This is an increase of almost 25% over the previous crop year and reflects active domestic marketing campaigns by major processors. Coffee consumption, both ground and soluble products, has been gaining ground in the domestic market in recent years, particularly in larger urban areas. Coffee shops are mushrooming in the main towns. Per capita consumption is still low (0.5-0.6 kg/year). Vietnam’s Ministry of Agriculture and Rural Development (MARD) estimates the per capita coffee consumption rate in the two largest urban areas at 0.75 kg/year for Hanoi and 1.6 kg/year for Ho Chi Minh City. Highlands and Trung Nguyen are two major chains, now quite visible throughout Hanoi and Ho Chi Minh City.

Stock There is no official data available for coffee stocks. Post keeps unchanged the carryin stocks for 2006/2007. Exports should continue to increase since coffee export prices remain high. Post therefore revises down ending stocks for 2006/2007 by 38%. Even so, ending stocks for 2006/2007 are markedly higher than the previous market year due to significantly higher production levels. Growers, processors and traders are holding stocks.