Vietnam coffee output hit by low prices: Hiang Kie

Vietnam coffee output hit by low prices: Hiang Kie

SINGAPORE (Reuters); International coffee prices have fallen so low that some Vietnam farmers are leaving cherries unpicked, head of Singapore coffee trader Hiang Kie Pte said on Monday. "I saw cherries virtually dying on plants...There could be 5-10 percent losses, or even more," said managing director Ong Sing Kai, who toured Vietnam's coffee producing regions of Daklak and Lam Dong late in December.

The two regions produce most coffee in Vietnam, which has doubled robusta production in the last two years.

"The quality could also suffer, if not already...The reason you don't see it is because the production is so big," Ong told Reuters in an interview.

Vietnam's 2000/2001 crop, just harvested, is expected to reach 750,000 tons or more and has helped slash international robusta coffee futures prices to near 30-year lows.

The futures fell below US$600 per ton in December, down from $1,200 a year ago and a peak of around $2,700 two years ago.

"In a way this decline...is good for them. They tell them the reality of things," said Ong. "If prices had been reasonable -- say around $700 or $800 (per ton, FOB), it would continue to produce and grow the output."

Vietnamese benchmark robusta prices are around $450. The Vietnam Coffee and Cocoa Association (VICOFA) froze prices in December when it saw them sliding to below $400.

Hiang Kie, set up in 1936 by Ong's father, trades green coffee around the world, roasts some beans and runs 31 gourmet outlets in the region, including 21 in Singapore, with 2000 turnover of around 35,000 tons.

Vietnam's growth in robusta production has particularly hit Indonesia, which has lost a lot of market share and influence over determining prices.

Ong, who also chairs the Singapore Coffee Association, said however that Indonesia's arabica market, which has enjoyed increasing popularity in the U.S. specialty coffee market, would be more difficult to attack.

"It's hard to beat Vietnam in terms of robusta...but Indonesia will continue to play an important role, especially when the political situation stabilizes. They could easily increase the production," Ong said.

He said Indonesia's main arabica -- Mandheling -- had a strong position on which to build.

"It's a unique coffee... It has a heavy body and an intense flavor you don't normally get from washed coffees from Central America."

Asked about Vietnam's efforts to grow arabica, Ong said: "We're looking into roasting Vietnamese coffee. But it's not so easy. They have not yet standardized arabicas."

Ong expressed his doubt that Vietnam would be able to carry out a plan to retain as much as 170,000 tons of exportable coffee as part of an international scheme to rescue the ailing coffee prices.

"They do not have the capacity to fulfill the plan," he said, referring to financial costs as well as storing facilities.

"The temptation to sell by farms and collectors (is large), especially when you have a big crop," he said.

In addition to the first Hanoi scheme to retain 60,000 tons for six months, the Hanoi government is considering withholding another 90,000 tons. Separately the Daklak province is discussing holding back 20,000 tons.

"They may want to look at alternative crops," Ong said. "They can be quite quick in switching economic activities...I'm quite sure some of them have already re-planted something else."