(Updates prices in fifth paragraph.)
July 24 (Bloomberg) -- Coffee farmers in Vietnam, the world’s top grower of robusta beans, are forecast to gather a record crop in the 12 months from October 2015 as they improve cultivation methods and replace old trees with new varieties.
Output that year may increase to an all-time high of 1.87 million metric tons, the median of estimates from nine traders and analysts compiled by Bloomberg shows. That’s 8.7 percent more than the record in 2013-2014. Average yields may rise to 2.83 tons per hectare from 2.65 tons as the area rises to 660,000 hectares from 650,000 hectares, the survey shows.
Expanding yields will strengthen the country’s role as a supplier to drinks makers such as Nestle SA and Mondelez International Inc. at a time when rising local consumption erodes exports from Indonesia, the second-biggest producer in Asia. Companies are buying more robusta after its discount to arabica reached the widest in more than two years in April.
“New plantations are starting to be productive,” said Phan Hung Anh, deputy director of Dak Lak-based Anh Minh Co., the largest private exporter by volume. “The new varieties are not only more resistant to harsh weather conditions, but their yields are much higher than the older trees.”
Robusta futures climbed 20 percent to $2,014 a ton this year in London on demand from blenders, while arabica soared 61 percent in New York amid supply shortages. The gap between robusta and arabica prices widened to $1.1655 a pound on April 24 from a low of 27.94 cents in December and was at 86.74 cents.
The harvest in Vietnam almost doubled in the past decade while Indonesian production rose about 30 percent, according to the U.S. Department of Agriculture. The crop in Southeast Asia’s largest economy will be 8.9 million bags (534,000 tons) in the 12 months started in April from 9.5 million bags a year earlier and the lowest level in three years, USDA data show.
“We had too much rain last year, which hurt production in 2014,” said Hutama Sugandhi, chairman of the Indonesia Coffee Exporters’ Association. “Small cherries and flowers were knocked off the trees and beans rotted on the ground. That’s affected the quality,” he said by phone from Surabaya.
Consumption in Indonesia may climb more than 30 percent in the next two years as the population expands and incomes rise, Irfan Anwar, chairman of the Association of Indonesian Coffee Exporters and Industries, said in Jakarta in May.
While yields in Vietnam are climbing because of better varieties and methods, the increase will be slow because there are a lot of old plantations, said Le Ngoc Bau, director of the Western Highlands Agriculture & Forestry Science Institute. Some farmers are clinging to areas that yield as little as 1.5 tons because they haven’t seen the need to replant yet, he said.
The area for coffee farms may have little scope to expand because of a shortage of suitable land and competition from crops such as pepper and rubber, said Tran Tuyen Huan, general director of trader Asia Commodities Joint-Stock Co. in Ho Chi Minh City. Vietnam is the world’s largest pepper producer and third-biggest rubber grower.
The harvest that starts in October may decline 4 percent to 1.65 million tons as the trees recover from a record crop this year, a Bloomberg survey showed earlier this month. The yield and production estimates from analysts and traders in the survey for 2015-2016 were based on normal weather conditions.
“Yields in the past reached 4 tons at best,” said Anh from Anh Minh Co., the private exporting company in Dak Lak. “The average yield in newly planted areas is 6 to 7 tons and for some farmers it may even reach 8 to 9 tons,” he said. The area won’t change much as new farms replace old ones, he said.
Farmers are using better methods for irrigation and applying fertilizer, said Bau from the Agriculture & Forestry Science Institute. They also plant saplings that have remained in the nursery twice as long as before and bear fruit earlier, increasing output and reducing costs, he said by phone.
The world market for arabica and robusta will see a shortage of 11.3 million bags in the 12 months from October, the most in more than a decade, from a surplus of 4.7 million bags this year, Volcafe, a unit of trader ED&F Man Holdings Ltd., said in June. A bag weighs 60 kilograms (132 pounds).
Pham At, a 59-year-old farmer in Dak Lak province, expects to boost his yield to 5.5 tons in 2015-2016 from 5 tons this season. “I always try to follow the right procedures for irrigation, fertilizer and pesticides to ensure the best results, but selecting good varieties is the key,” he said.
--With assistance from Yoga Rusmana in Jakarta.