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Some Vietnamese coffee farms are thriving despite drought, but may not stop rising espresso prices. By Reuters

Some Vietnamese coffee farms are thriving despite drought, but may not stop rising espresso prices.  By Reuters

By Phuong Nguyen and Francesco Guarascio

PLEIKU, Vietnam (Reuters) – Vietnamese coffee farmers have been hit hard this year by the worst drought in nearly a decade, sparking concerns about more expensive espressos around the world, even as some farmers maintain healthy yields through intelligent countermeasures.

National forecasts for next season’s harvest in Vietnam, the world’s second-largest coffee producer, remain bleak.

The Vietnam Mercantile Exchange (MVX) expects a 10-16% drop in production due to the extreme heat that hit the Central Highlands coffee region between March and early May, according to Deputy Director Nguyen Ngoc Quynh.

However, the return of rains in recent weeks has improved the outlook, boosting the confidence of farmers and officials. But it is not yet clear whether improving weather conditions will help boost production and lower prices of Robusta beans, the most common variety in espressos and instant coffees, of which Vietnam is the world’s largest producer. .

“I expect the country’s production to drop by 10 to 15 percent, but my farm will increase its production,” said Nguyen Huu Long, who grows coffee on a 50-hectare plantation in Gia Lai, the one of the main coffee-producing provinces of Vietnam. .

To protect his trees during the heatwave, he kept the soil around the plants moist by covering it with leaves. Unlike the local practice of cutting down trees every few years to improve soil quality, he maintains his cultivation for decades. As a result, plants have deeper roots and greater access to underground water reserves.

Farmers on his plantation also soften the soil around the plants to improve the absorption of rainwater and fertilizer, said Doan Van Thang, 39.

Tran Thi Huong, a farmer who works on another plantation 20 km from Pleiku, the capital of Gia Lai, had to use more water than usual. Thanks to abundant supplies from canals built by local authorities, she was able to keep her plants sufficiently irrigated during the heatwave.

The coffee cherries are smaller than in previous years, but she expects overall production to be unaffected. It also helped that she intervened in time with biopesticides against insects which were more numerous than usual due to the extreme weather conditions.

This is in line with forecasts from the United States Department of Agriculture (USDA), which estimates that Vietnam’s next harvest would be roughly flat compared to the current season’s production – far less pessimistic than national projections. .

BITTER PRICE EFFECT?

Whatever the impact on the harvest, coffee prices for drinkers around the world are likely to rise.

Wholesale prices in Vietnam and Robusta futures traded in London hit record highs earlier this year, mainly after a disappointing harvest in Vietnam and due to fears about the country’s next harvest after drought, according to several traders and analysts.

Record wholesale prices have so far had a limited impact on consumer prices, with coffee inflation rising just 1.6% across the 27-member European Union in April, latest data shows of Eurostat, and 2.5% in Italy, a Robusta-loving country.

Although much lower than the price rise from a year earlier, it was more than 1% in the EU’s March figure, a sign that roasters may have started to pass on their higher costs to consumers.

Additionally, concerns over Vietnam are far from over as insufficient rains after drought or excessive downpours ahead of the upcoming October harvest season could further reduce production, a Vietnam-based trader warned.

© Reuters.  A drone view shows a coffee plantation owned by Doan Van Thang, a coffee farmer, in Pleiku, Gia Lai province, Vietnam June 12, 2024. REUTERS/Minh Nguyen

High wholesale prices could also be here to stay, as demand for Robusta increases globally and farmers have increased their influence in the current circumstances, with many also replacing coffee plants with durian with a pungent smell, a tropical fruit in high demand in China.

“They have the financial capacity to hoard and hold on to goods, so they will not be in a hurry to sell,” said Le Thanh Son of Simexco, one of Vietnam’s largest coffee exporters.