Vietnamese coffee premiums rise; exports seen down

Premiums for Vietnamese coffee to global robusta futures widened this week, while buying has been moderate on steady demand from roasters, traders said on Tuesday. While the 2015/16 crop harvest in the world's largest robusta producing nation has entered its peak, lower prices may prevent a pick-up in selling by growers, traders said. "Roasters have steady demand and willing or not, they need to buy Vietnamese coffee," said a trader with a foreign firm in Ho Chi Minh City.
On Tuesday robustas dropped to 33,400-33,500 dong ($1.49) per kg in Daklak, the country's main growing province, from 34,200-34,500 dong a week ago, after London's ICE March contract ended down 2.3 percent at $1,507 a tonne on Monday. Premiums for Vietnamese robusta grade 2, 5 percent black and broken beans widened to $30-$50 a tonne to the March contract, from premiums of $20-$40 a tonne late last week.
Futures and differentials often move opposite. Vietnam is forecast to produce 1.08 million tonnes, or 18 million 60-kg bags, of coffee in the current 2015/16 crop, down about 10 percent from the previous crop, Luong Van Tu, the Vietnam Coffee and Cocoa Association (Vicofa) chairman, said. "With prices lower, growers have not taken enough care of the trees," Tu added. Earlier this year Vicofa had forecast a drop of 15-20 percent, he said. "Investment in roasting business has increased, taking away part of the exportable coffee, and domestic consumption has also risen beyond 10 percent (of output)," Tu told Reuters.
Vicofa also forecast 2015/16 exports to drop 12.7 percent to 1.1 million tonnes (18.3 million bags), he said. The association's forecasts are in contrast with recent projections by foreign institutions of a larger crop. A US Department of Agriculture attache in Vietnam projected the 2015/16 output to rise 7 percent to 29.3 million bags, while exports could rise 30 percent to a record 28.72 million bags.
Fitch Ratings' BMI Research has forecast Vietnam's 2015/2016 output to recover modestly, rising 1.2 percent to 28.5 million bags, and will accelerate by 4 percent to 29.66 million bags in the 2016/17 season. In a separate development, traders forecast December coffee exports at between 100,000-120,000 tonnes (1.67 million to 2 million bags), against an estimated 100,000 tonnes shipped last month.