Vietnam's coffee sales slow as prices drop

Coffee trading in Vietnam slowed on Tuesday after London prices lost ground, pushing domestic prices off their record highs, and stocks dwindled, traders said. Liffe July robusta coffee ended Monday down $54 at $2,473 a tonne, pulling Vietnamese robusta beans to between 48,000 and 48,400 dong ($2.33-$2.35) per kg on Tuesday in the key growing province of Daklak.
"Supply is scant, with only 10-15 percent of the crop now left in farmers' hands," a Vietnamese trader said from Buon Ma Thuot city, the capital of Daklak. The 2010/2011 harvest produced 20 million 60-kg bags, he said. Foreign trading firms were holding good stocks of Vietnamese coffee in their Vietnam-based warehouses, which could help fill the coffee shortage, he said, without giving any estimates of the stocks. Another trader in Ho Chi Minh City said farmers planned to sell only if prices broke an all-time high of 51,900 dong per kg struck on May 11 in the Central Highlands coffee belt.
"Only very rich farmers now still have stocks," he said. Based on traders' forecasts on May shipment of up to 100,000 tonnes and government export data, Vietnam will have exported at least 1.02 million tonnes, or 17 million 60-kg bags, of coffee between October 2010 and the end of this month. That leaves 3 million bags of coffee in the country, based on the harvest of 20 million bags.
Export companies list their buying prices at around 48 million dong per tonne but could only be able to buy from farmers at around 50 million dong, the first trader said, adding that sales were very slow. "Exporters have not made any offers in the past three days because they could not buy on the domestic market," a second trader in Ho Chi Minh City said. "They only sell if they have coffee handy as nobody dares to go short now on the domestic market," he said.
Foreign firms sought to buy Vietnamese beans at discounts of $60-$70 a tonne to London's July contract, narrowing from discounts of $80-$90 last week, but there were no sales, traders said. The discounts meant Vietnamese robusta grade 2, 5 percent black and broken fell to $2,403-$2,413 a tonne, free-on-board basis, from $2,512-$2,522 last Tuesday.
The rainy season now under way in the Central Highlands is another factor that contributed to slowing coffee sales as farmers no longer need cash for fuel to water trees. For the next 2011/2012 crop, traders overseas forecast the output at 22-24 million bags, while traders at foreign companies in Vietnam said it was now still early to make the forecast.
Coffee farmers in Vietnam are ploughing gains from steadily rising prices into fertiliser and water pumps to incrementally lift yields, betting the global market will remain in their favour for years before rivals can increase supply. "Rains in coming months could cause cherries to drop, thus affecting the overall output," the first trader in Ho Chi Minh City said.
Traders said crop surveys in July may provide a better outlook for the next 2011/2012 harvest, due to start in late October or early November. The coffee crop year in Vietnam, the world's second-largest producer after Brazil, lasts between October and September.