Dec 16 / Laleska Moda

Vietnam Crop Tour - December 2024

  Back to main blog page

We visited the two largest producing regions in Vietnam

There were major differences between the two regions visited, Dak Lak and Lam Dong, particularly regarding grower size, production area and crop condition.

Vietnam coffee-producing regions visited – Dak Lak and Lam Dong

Source: Hedgepoint

Given the current weather pattern, historical data, and the crop tour, we decided to maintain our estimate for the Vietnamese crop in 24/25 in 27.1 M bags.

Vietnam: Supply and Demand (M bags)

Source: Hedgepoint

Dak Lak: A diverse profile

Through our visit, we observed that in Dak Lak there are mainly small and medium producers. Both small and medium growers tend to grow pepper, durian, and other fruits alongside coffee.

Smaller and less prosperous farmers have reduced part of their coffee area in the last 5 years to plant durian, a more profitable crop at the time.

However, for medium-sized producers, despite some area reduction in recent years, investment is being made to replace trees in part of the area with new, more productive varieties.

On the other hand, the weather in the region has not been ideal this year. In addition to dry and hot weather until mid-2024, there was more rain in Q3 and Q4, which delayed bean ripening and harvesting (15-20 days), leading farmers to start their harvest with around 60-80% of ripped beans. Weather also created a more favorable environment for mealybug to spread. The current rains may delay beans' drying and could also affect their quality.

Most farmers will see a drop in production due to adverse weather and the mealybug. However, the intensity of the drop varies from farm to farm, ranging from 10% to up to 50%, especially among the poorer farmers.

Left to right: Pepper and Durian in coffee area in Dak Lak; Coffee tree, with green and ripped beans; Mealybug in coffee trees in Dak Lak

Source: Hedgepoint

It is interesting to note that in terms of farmer sales, the poorer producers are already selling their crop and are likely to sell their entire production once the coffee beans are dry. Medium producers, on the other hand, are selling around 10-30% and will hold on to their beans until new record prices are reached.

According to the farmers, 100,000 VN dong per kg is a price that guaranteed further investments in coffee areas. However, 130,000 to 140,000 VN Dong per kg seems to be the new level for additional selling. Many comments that February could be a good month for selling as it is the off-season in Brazil and Indonesia and prices could enter a bullish trend.

Regarding the 25/26 crop, is important to highlight that the recent rains also triggered a flowering in most of the coffee areas in Dak Lak, albeit is too soon to predict if this will harm the new season.While this small flowering had dyed out, the trees seemed ready for a new bloom in the region.

Left to right: Workers harvesting; Coffee drying; bag with some greens and ripped coffee

Source: Hedgepoint

Lam Dong: Where the big farmers are

Unlike Dak Lak, Lam Dong gave a more positive outlook for Vietnam's robusta production. The province is the second largest producing region and where the biggest and richest farmers are located. While some farmers also had pepper plantations, many only produced coffee in the region.

Weather conditions were more favorable in this region and farmers had enough profits from the previous season to maintain the use of fertilizers and pesticides and introduce more productive varieties in this area. The new varieties are introduced by grafting into the old trees. Not only were the trees healthier, but they tended to be taller than in Dak Lak.

The new varieties also have a late harvest, towards the end of November and December. Harvest in the region is expected to finish in January. Most of the producers are likely to wait until 80% of the beans are ripped to harvest. According to some farmers, the introduction of new varieties in the region happened about 10 years ago, with producers now focusing on renovating the area with varieties close to the Brazilian conilon.

By using these varieties, productivity is high (likely the highest in all of Vietnam) and production in the region has been more stable and less affected by weather. The renovation also takes place every year, helping maintain productivity. Despite rain in Q3 and Q4, the mealybug population was lower than in Dak Lak, with little impact on production.

Left to right: Coffee plantation in Lam Dong; Introduction of new varities by grafting; Larger bean size in Lam Dong

Source: Hedgepoint

Farmers' sales in the region were also lower than in Dak Lak, as producers have reaped profits from previous crops and are in no hurry to sell. Farmers in the regions have only sold between 2% and 15% of their crop and are likely to hold back for the next few months. The minimum price target in the region is 130,000 VN dong per kg, but many farmers have indicated that they will not sell until at least February. Some farmers also indicated that if the price target is not met, they may hold their sales until May (when investments for 25/26 should start).

Left to right: Coffee plantation in Lam Dong; Introduction of new varities by grafting; Larger bean size in Lam Dong

Source: Hedgepoint

Vietnam Weather

For the complete weather report, click here.

Dak Lak – Cumulative precipitation (mm)

Source: Refinitv

Lam Dong – Cumulative precipitation (mm)

Source: Refinitv

Dak Lak – Average Temperature (ºC)

Source: Refinitv

Lam Dong – Average Temperature (ºC)

Source: Refinitv

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Lívea Coda
livea.coda@hedgepointglobal.com
www.hedgepointglobal.com

Disclaimer

This document has been prepared by Hedgepoint Global Markets LLC and its affiliates (“HPGM”) solely for informational and instructional purposes, without the purpose of instituting obligations or commitments to third parties, nor is it intended to promote an offer, or solicitation of an offer of sale or purchase relating to any securities, commodities interests or investment products. Hedgepoint Commodities LLC (“HPC”), a wholly owned entity of HPGM, is an Introducing Broker and a registered member of the National Futures Association. The trading of commodities interests such as futures, options, and swaps involves substantial risk of loss and may not be suitable for all investors.  Past performance is not necessarily indicative of future results. Customers should rely on their own independent judgement and outside advisors before entering in any transaction that are introduced by the firm. HPGM and its associates expressly disclaim any use of the information contained herein that directly or indirectly result in damages or damages of any kind. In case of questions not resolved by the first instance of customer contact (client.services@hedgepointglobal.com), please contact our internal ombudsman channel (ombudsman@hedgepointglobal.com) or 0800-878- 8408/ouvidoria@hedgepointglobal.com (only for customers in Brazil)

To access this report, you need to be a subscriber.