Posted date: 18/02/16

Water shortages will "seriously affect" Vietnam's robusta crop, the country's coffee body said.

The Vietnam Coffee and Cocoa Association (Vicofa) warned of dry weather in country's central highlands, the main coffee growing region in the world's top robusta producers.

River levels will be 60-80% below average in the first four months of 2016, and 30-50% down in the May-June period, Vicofa warned.

Coffee production threat

The dry weather threatens the robusta crop as it develops ahead of the harvest, which starts in the North Hemisphere autumn.

"The situation with drought will seriously affect robusta coffee production in the Central Highlands," Vicofa said.

The association did not offer a forecast of potential crop losses.

Price support downplayed

Speaking to Agrimoney, Jack Scoville of Price Futures group agreed that Vietnam had been seeing dry weather, but downplayed the effect on prices.

"The market's kind of dismissing that," Mr Scoville said, citing "ideas are there that there's plenty of coffee there to sell anyway".

"Normally it would have much more effect," he said, but "there's plenty of supply from previous years."

Vietnamese robusta selling has been slow since the last harvest, as farmers hold out for higher prices, leaving a cushion of stocks to make up for any shortfall in the next harvest.

Slow selling

Mr Scoville said that so far he has seen a "reasonably slow" pace of robusta selling, after Vietnam returns from its Tet holiday last week.

Still, this week analyst Judith Ganes-Chase noted that the backlog would eventually find its way onto markets.

"I have to believe that hoarded coffee will continue to find its way into the  market whether prices go up or prices go down due to the need to raise cash by those that can't keep holding onto the past crop coffee," she said.

March robusta futures were up 0.6%, at $1,418 a tonne in early afternoon deals in London.