Coffee prices up further in Vietnam; Indonesia faces supply crunch

HANOI: Coffee prices in Vietnam continued to rise this week, tracking gains in London robusta futures on supply concerns, while traders were scrambling to buy beans in Indonesia as those from the current harvest were limited.

Farmers in Vietnam sold beans at 59,200 dong to 61,100 dong ($2.53-$2.61) per kilogramme, higher than 55,200 dong to 57,500 dong range last week. July robusta coffee settled up $16 at $2,573, as of Wednesday’s close.

“July prices remain sky high due to concerns over short-term supplies shortage in key markets,” said a trader based in the coffee belt. “Many exporters are afraid that they do not have enough beans to deliver in the second half of this year.” The trader estimated a 10%-15% decrease in output in the current crop against the previous one, while the United States Agriculture Department said in its latest report production would be 6% lower.

BMI, a Fitch Solutions unit, said the transition to El Niño conditions in the third quarter has stoked fears of reduced output in both Vietnam and Indonesia. Traders in Vietnam offered 5% black and broken-grade 2 robusta at a premium of $150-$180 per tonne to the July contract, widening from last week’s $150-$160 range.

While Indonesian Sumatra robusta coffee beans were offered at $270 premium to the September contract. The price was $140 premium to the July contract. “The price is soaring because exporters are aggressively buying due to limited supplies,” said a trader. The premium was at $215 to the July contract, another trader said, up from a $170-$200 premium range a week ago.

“The increase was in line with the local market movement,” the second trader said. “Supplies are not enough, causing exporters to scramble for beans and pushing local prices to rise higher than London prices.”