Vietnam News

Vietnam crop prices spike in a stormy autumn

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Severe fall weather in Vietnam from the La Nina effect has delayed harvests and shipments, drastically pushing up prices of mainstay agricultural exports.

Typhoons and heavy rains have ripped through the Southeast Asian nation since around October, delaying the collection of latex from rubber tree plantations.

“Production has decreased, so we are temporarily refusing new orders for natural rubber,” said Vo Van Thanh, chairman of VRG Japan Rubber Export, a Vietnamese merchant for the product.

Vietnam is the world’s third-largest producer of natural rubber, accounting for roughly 10% of global production. Only Thailand and Indonesia rank higher.

Market observers suspect that rubber production will not recover by February, when the regular wintering season for rubber trees begins. As a result, natural rubber futures now hover around a rarely seen high of 230 yen ($2.20) per kilogram on the Osaka Exchange.

Robusta coffee beans, the main ingredient in instant coffee, have also risen on concerns over Vietnamese supply. The country is the largest exporter of Robusta, accounting for 40% of all production.

Futures for the commodity now go for around $1,330 per ton on the London market. They touched $1,426 in mid-November, the highest in two months.

Vietnam is forecast to produce 28 million bags of Robusta coffee in the 2020-21 marketing year, the U.S. Department of Agriculture reported in November — down about 1.2 million from the June projection. Each bag holds 60 kg of beans.

“It appears that the continuous rain and the delayed harvest is one reason” for the downgrade in the projected output, said Ajinomoto AGF, the coffee arm of food company Ajinomoto.

Robusta prices “will likely trend strongly when also considering the increased consumption of instant coffee at home,” said Shiro Ozawa, an adviser for Tokyo-based coffee trader Wataru & Co.

Vietnam is also the world’s largest producer of pepper. But growers were also hit by typhoons in early fall, possibly impacting harvests usually made in December to February.

“Some regions are still experiencing heavy rain, so we don’t know the full extent of the damage yet,” a spice company said.

Meanwhile, demand for the kitchen staple remains strong despite the coronavirus pandemic’s impact on the restaurant industry. “Retail demand is rising, so there hasn’t been much change to overall levels,” according to a trading house. Chinese buyers have also been placing big orders since summer.

Owing to the large inventories that companies have on hand, black-pepper prices have stayed flat for five months at 550 to 650 yen per kilogram. White-pepper prices have held steady for longer than a year at 750 to 850 yen. With prices more than 70% lower than during a 2016 spike, growers have been losing interest.

“The recent rains could further squeeze supply, pushing up prices over the medium to long term,” a trading company said.

By Munemasa Horio, Sachiha Kurose & Yuji Yamamoto – Nikkey Asia – December 12, 2020

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