JAN 22 (SpillingTheBeans)–Coffee exports from Vietnam in the month of December fell 28 percent to 277,000 metric tons, or 4.617 million 60-kilogram bags, down from 387,000 tons, or 6.45 million bags shipped in the first three months of the last 2012-13 cycle, Vietnam’s General Statistics Office reported from Hanoi.
So where is the record crop from Vietnam? Well, guess what, it’s not going to happen!
For months and months and months, traders in the bear camp of the market — those who insist the world continues to face a situation of “massive over-supply” and hence coffee prices should remain low — have continued to claim that the new 2013-14 harvest in Vietnam is a new record bumper crop that will yield a total of 30 million bags.
And for just as long we have here at SpillingTheBeans insisted that they are wrong and that there is no way the conditions for such a big crop in Vietnam is in place.
There are multiple arguments which easily will show why the illusion of a record crop of that size is nothing more than that — an illusion!
The key bear argument is that the reason why the world has not yet seen evidence of a record crop in Vietnam is because producers are holding back on their coffee and are hoping to wait it out for better prices. Let’s discuss this a bit. Vietnamese coffee growers harvest most of their crop in November and December, and by the end of December in any average crop year at last 60%-70% of the entire crop is already harvested, while in many years as much as 80 percent of the harvest is collected.
This means that if the 2013-14 crop is to reach 30 million bags and if just an extremely conservative 60 percent was picked by the end of December Vietnamese growers would following the exports in the first quarter of 4.4 million bags now be holding on to 18 million bags of coffee. If 70 percent of the harvest has been picked, growers are holding on to 16.6 million bags and if 80 percent has been picked — as is the case in most years and which both local traders as well as the official Vietnam Coffee and Cocoa Association has said is the case this year — local stockpiling is at a ridiculous 19.6 million bags. Just try to think of this figure for a few seconds and try to imagine HOW MUCH coffee we are talking about here.
Really, seriously, does anyone think that is possible? At the world’s largest coffee cooperative of Cooxupe in Brazil’s Southern Minas coffee region a new gigantic warehouse was inaugurated a few years ago which — as one of the biggest in the world — has maximum storage capacity of 1.4 million bags. SO sure, why not imagine that Vietnam with less than half of the coffee of Brazil has the capacity between tiny small-holder local growers and private exporters have 14 times the storage capacity of Brazil’s Cooxupe?
Nobody is denying that Vietnamese growers are holding back on supply, but the wishful thinking of those market players still left with large net short positions to cover simply don’t add up to reality.
Numerous exporters and traders in Vietnam’s key southern coffee region of the Central Highlands interviewed by SpillingTheBeans in the last two weeks confirm that stocks even remotely close to that scale are not available.
“Most traders and producers have since the drought in February made it clear to the foreign trade the crop is not going to be a record, and in the best case possible it may match that of the 2011-12 harvest which was between 25 and 26 million bags,” said a trader with a major local exporter in Buon Ma Thuot, the coffee trading capital of the Central Highlands.
“Traders forget that not only did the dry weather cause a significantly smaller bean size, but most growers are tiny producers who even if they may hold on to a few bags of coffee still have to sell smaller volumes regularly to generate income for food and household items,” said another local trader in Dak Lak province.
Vicofa’s Chairman Luong Van Tu said as recent as last November that Vicofa maintains its forecast for the new 2013-14 harvest to be down 10-15 percent on the last crop with total exports from the current harvest unlikely to yield more than 23.5 million bags. This would be down 9 percent on exports in the 2012-13 cycle of 26 million bags, a figure that included significant carry-over stocks of up to 2 million bags, according to industry estimates.
Stay tuned for more reports on the new harvest in Vietnam, coming up in the next few here at SpillingTheBeans.
For more background, please see “Evidence Grows of Lower Than Expected Coffee Harvest in Vietnam” http://spilling-the-beans.net/evidence-grows-of-lower-than-expected-coffee-harvest-in-vietnam/
“Vietnam Coffee Exports in June Plummets 37% on Lower Supply” http://spilling-the-beans.net/vietnam-coffee-exports-in-june-plummets-37-on-lower-supply/
“Vietnam and Indonesia Coffee Crops Both Seen Down in 2013-14, Says USDA” http://spilling-the-beans.net/both-vietnam-and-indonesia-coffee-crops-seen-down-in-2013-14-says-usda/