Tight Vietnam domestic supply curbs coffee sales

HANOI - Vietnamese coffee exporters are not shipping fresh stock this week as they face tight supply due to dry weather prevailing in the country, traders said on Tuesday.

The dry season in Vietnam, the world's top robusta producer, has started peaking in the Central Highlands coffee belt, requiring growers to step up the watering of trees.

Traders said many growers were not selling their produce because domestic prices did not improve much from late February, when a kg of robusta was 29,300-29,500 dong ($1.3), the lowest since mid-Nov 2013.

On Tuesday, robustas stood at 30,700-31,100 dong/kg in Daklak, the country's main coffee-growing province, up from 30,700-30,900 dong last Thursday, but which were still down from early last week.

Tuesday's minor gain came after ICE May robusta coffee settled up 0.1 percent at $1,394 per metric ton on Monday.

"Only a few firms which are very much in need of coffee will have to purchase now, while exporters don't want to sell," said a trader at a foreign firm in Ho Chi Minh City.

Premiums of robusta grade 2, 5 percent black and broken firmed at $60-$70 a metric ton to the May contract, from premiums of $50-$70 a metric ton last week.

Several exporters have started quoting a premium of $50 a metric ton to ICE July contract.

"The pricing now has made it difficult for several exporters to buy coffee for loading, after they have sold at premiums of $20-$30," said another trader in Ho Chi Minh City.

Delays have yet to come, traders added.

Vietnam is also selling slowly because farmers hope the dry weather will help boost prices, traders say.

Robusta on ICE Futures Europe could rise to $1,500 per metric ton  by the end of March, according to a Reuters poll in January.

Rivers in Daklak are exhausting, the provincial weather station said in a report; this in turn, reduces underground water table, which is needed for coffee trees until monsoon begins in May.

In Gia Lai, a minor producer among the five provinces in the coffee belt, drought has hit on a large scale, affecting crops, a state-run newspaper cited a Gia Lai government report.

Water shortages could reduce Vietnam's 2016/2017 coffee output, the Vietnam Coffee and Cocoa Association has said.

On Monday, the London-based International Coffee Organization said stocks in exporting nations were filling a shortfall between output and consumption.

Khoa Le

Source: AgWeek