Historic Drought Dwindles Vietnams Robusta Coffee Supply As Prices Climb

Amid its worst drought in 90 years, Vietnam, the world's biggest producer of robusta beans, is forecast next season to yield its smallest coffee crop in four years. As a result of the dwindling supply, the country's robusta coffee prices have risen to their highest level in six months.

Analysts forecast Vietnamese growers to collect 1.5 million metric tons in the harvest starting this October, which would be the lowest since the 2012-13 crop year. This season's output -- exported from January to June -- is expected to be 1.65 million tons. The trees are just beginning to form berries, so the impact on the trees' yields for the current crop is only just being seen. What is known is that the severe drought has killed nearly 250,000 acres of coffee trees so far.

Vietnam mainly grows robusta beans, which are used primarily in instant coffee, but also produces some higher-quality, higher-priced arabica beans. Its projected decline for next season's harvest sent coffee prices climbing 2% to close at $1,649 on ICE Futures Europe on May 6, the highest since Nov. 5.

Concern over dry weather not only in Vietnam, but also in Brazil and Indonesia, has led to a 17% jump in robusta prices since February on London's Intercontinental Exchange, and prices could rise further if the trend continues as predicted.

Vietnam's drought and water shortage conditions are not expected to improve much. May's rainfall in the Central Highlands, the nation's main producing area, is forecast to be 20% to 40% lower than average, according to Vietnam's National Center for Hydro-Meteorological Forecasting. Average temperatures are likely to be 1° Celcius to 1.5° Celcius higher than normal, it said.

The country exported an estimated 976,200 tons of coffee between October and April, up 27.4% from a year ago, according government statistics.