Vietnamese coffee trade up on supply worries

Trading in Vietnamese coffee rose this week as buyers stocked up amid worries a drought would crimp supply, although farmers held on to their supplies in hopes local prices will climb further from current four-month highs, traders said. Farmers in Vietnam's Central Highlands coffee belt have been hit by the worst drought in three decades brought on by the El Nino weather pattern, and more damage to the 2016/17 crop is expected due to water shortages, industry body Vietnam Coffee and Cocoa Association (Vicofa) has said. 

While Vicofa did not provide an output number, traders said that according to some surveys, the drought could cut output by at least 10 percent in the year to September 2017. "Buying is strong after several companies completed surveys on Vietnam's production and saw damage from the drought," said a trader in Buon Ma Thuot, the capital of Daklak, Vietnam's biggest coffee growing province. 

Vietnam, the world's top robusta producer, could export 140,000-150,000 tonnes this month, similar to March shipments, as drought spurs demand, traders have said. "Middlemen are fixing their contracts, and exporters, who have sold (to foreign buyers) earlier, are trying to take in beans from domestic markets," a trader in Ho Chi Minh City said. 

Middlemen, or buying agents, deposit the beans bought from farmers in exporters' warehouse and fix their selling price whenever they see profits. Their hoarding and selling can distort the supply-demand balance on domestic markets. Farmers are not selling much as they anticipate further gains, traders said. 

Source: Business Recorder