Vietnamese coffee prices fall

Vietnamese coffee prices fell this week by less than London robusta futures, leaving export quotations above global levels, raising the risk of defaults especially when stocks are dwindling, traders said on Tuesday. Exporters have delayed loading part of contracts totalling around 100,000 tonnes since May because of a shortage of stocks, an industry official had said on Monday. This has prompted at least two traders to raise concerns of possible defaults in shipments.
Liffe September robusta ended down $66, or 2.8 percent, at $2,276 a tonne on Monday after hitting $2,269, the lowest level for the second month since mid-February, under pressure from Brazil's harvest and broad losses in commodity markets due to the Greek debt crisis.
Robusta beans in Daklak, Vietnam's top growing province, fell 1.4 percent from Monday to 47.9 million dong ($2,328) a tonne, placing indicative export offers at around $2,370 a tonne, free on board, a premium of $94 above London. Foreign buyers were seeking Vietnamese robusta grade 2, 5 percent black and broken at discounts of $40 to $50 a tonne to the September contract, but exporters were reluctant to sell, given the level of domestic prices. "They dare not sell, and it won't make sense for buyers to buy here at a price on a par with London, as they could go back and buy straight from the London market," a trader in Ho Chi Minh City said. Trade has also slowed because foreign companies wanted to take delivery of the beans committed earlier.
WIDENING PREMIUMS Exporters could lose $100 a tonne if they agreed to sell earlier this year at a discount of $60 a tonne to London and have to buy back from foreign traders at a premium of $40 a tonne now for loading, another trader said. The offered premium to London has widened from $20-$30 a tonne last week. Given the current slow trade, coffee export volume could fall in coming months. June shipments had already been expected to drop to 65,000-80,000 tonnes from an estimated 110,000 tonnes last month, traders said.
The tightness in supply could be relieved only when the 2011/2012 harvest starts from November, with output expected to rise thanks to increased investment by farmers after the increase in coffee prices. The 2011/2012 crop could produce 20.6 million bags, up 10 percent from the previous season, due to high yields and improved investment in production, a US Department of Agriculture report said. The latest forecast is still below a bullish projection last month by a foreign trader, who said production could reach 23-24 million bags, up from 21-22 million bags in the current crop.