Commodities Buzz: USDA Reduces Vietnam Coffee Production By 0.60 Million Bags For MY 2017/18

As per latest update from United States Department of Agriculture (USDA), Vietnam estimates Vietnams marketing year (MY) 2017/18 coffee production at 29.3 million bags, about 600,000 bags lower than the USDA estimate of 29.9 million bags, due to harvest losses caused by late rains. The forecast for MY 2018/19 production is about 29.9 million bags, a 2 percent increase compared to MY 2017/18, due to favorable weather during the flowering stage. Accordingly, FAS/Vietnam estimates bean export in MY 2017/18 to remain flat at about 25 million bags. The forecast for MY 2018/19 bean exports is slightly up to 25.2 million bags, due to expected improved production.

The Vietnam Coffee production for MY 2018/19 production is up, as favorable weather during the first four months of calendar year (CY) 2018 prompted good flowering and cherry setting. In addition, though prices were low at the beginning of MY 2017/18, sales were swift, increasing farmer incomes and allowing the purchase of vital inputs, such as fertilizer, to provide adequate nutrition for producing branches and coffee cherries. During the past three to four years, many farmers have been switching from coffee to growing other cash crops, such as black pepper, avocado, and passion fruit, in order to generate higher income. However, as noted in the 2017 Coffee Semi-annual, the situation is now changing because black pepper prices have been dropping continuously since CY 2017 and are currently sitting at only 50 percent of their former high. Some farmers are moving back into coffee, but others, especially those who have found that their land is not well suited for planting coffee, are looking to horticultural crops, such as avocado, passion fruit, and durian. Nevertheless, many farmers still rely on coffee because it can be stored and sold later at higher prices when supply is limited. Vietnam coffee bean export volume in recent years has become more stable, generally falling between 24-25 million bags, thanks to better land management, high replanting rates, the availability of inputs, aforementioned storage ability, and significant private sector involvement.