Vietnam coffee may face delays or even defaults as rising prices make it difficult to secure the required volumes in the domestic market for shipment, traders said on Tuesday. Indicative prices of robusta coffee in Vietnam rose to 39.5-39.6 million dong ($2,026-$2,031) a tonne on Tuesday, they said, up 7 percent so far this year.
"Risks are everywhere, at both sides of the sellers and buyers because if one fixes the price for delivery now, the exporter may find it difficult to buy on domestic markets when executing loading," a trader in Ho Chi Minh City said. Early last year companies delayed or defaulted on delivery of 200,000 tonnes after exporters and their buying agents placed ill-fated bets on a rise in futures prices.
Domestic prices are approaching the record high of 41 million dong a tonne seen in early March 2008 after London's March robusta coffee ended $56 higher at $2,185 a tonne on Monday. "Risks are rising along with higher prices, but risks mostly lie with deals by smaller, private export companies while major exporters are doing fine, as they are reluctant to sell too quickly and too far," a second trader said.
Vietnam, the world's largest robusta exporter, has more than 150 coffee exporters, but 20 of them - responsible for loading 80 percent of the total shipment - are more reliable, so risk lies with part of the remaining 130 firms, traders said.
They said it was early now to forecast how much coffee would be delayed as markets in Vietnam, the world's second-largest coffee producer after Brazil, are closed through February 7 to celebrate the lunar new year festival, known as Tet. Trading will resume on Tuesday, February 8.
As up to 10 million bags of the 18.3-million-bag 2010/2011 crop have been sold , 7.165 million bags of which had been shipped between October 2010 and last month , delays could hit some of the remaining 2.8 million bags, traders said. "There is another risk with quality, because if the exporter fails to buy locally for loading, the ratio of defects could rise due to exporter's blending," the first trader at a European trading house said.