Vietnamese domestic coffee prices held steady near a key level on Tuesday but farmers and exporters slowed their sales following a fall in London's robusta futures prices, traders said. Coffee exports from Vietnam, the world's second-largest producer after Brazil, could also slow in coming days because local exporters have been having trouble securing funds to buy beans due to high bank lending rates, they said.
Benchmark May robusta ended $7 lower at $1,987 a tonne ih London on Monday, while robusta beans in Vietnam - which normally track London movements - stood at 39,300-39,500 dong ($1.89-$) per kg on Tuesday, unchanged from Monday. "Farmers slowed their sales, having seen London prices drop, and even with domestic prices unchanged today, we cannot buy much from domestic markets," a Vietnamese exporter said by telephone from Daklak, the country's largest growing province.
Traders said the price of 40,000 dong per kg has been regarded by farmers as a threshold, or "psychological level", and they would refrain from selling if prices fall below it. Discounts to London's May contract stood unchanged at $20-$30 a tonne, leaving robusta grade 2, 5 percent black and broken at $1,957-$1,967 a tonne, free-on-board Saigon Port, above a range of $1,914-$1,924 last Tuesday.
Prices in Vietnam could get support if speculators maintain their long position in robusta, a trader in Daklak said. Speculators switched to a net long position on robusta coffee futures and options on Liffe in the week to February 14, from a net short position a week earlier, exchange data showed.
Buying and selling by Vietnamese coffee exporters has been slower so far in the 2011/2012 crop year, partly due to tighter bank credit and high lending rates, the Daklak exporter said. The coffee crop year lasts between October and September, with the latest harvest ended last month. Exporters have to pay interest of 18.5-20 percent per annum for dong loans, which made it tough for them to make any profits, the Daklak-based exporter said.
"Exporters hope and are waiting for banks to lower interest rates," Chairman Luong Van Tu of the Vietnam Coffee and Cocoa Association (Vicofa) said. Several major banks have announced rate cuts, to around 15 percent, but Vietnamese exporters said access to cheaper bank loans remained limited, which has capped their bean purchases and slowed export activities.
Farmers have been watering coffee trees in the first phase, supported by several light rains in recent weeks, said a trader in Buon Ma Thuot city, the capital of Daklak. "The weather has been favourable while losses from the fallen flowers are limited," he said, reacting to an assessment by industry body Vicofa. Rain and rough handling have ruined some coffee flowers in Vietnam, which could lead to a drop in the yields of the next crop, Vicofa Chairman Luong Van Tu said on Monday.