Vietnam's domestic coffee sales have picked up on higher prices, boosted by foreign buying demand and possible damage from dry weather, but the price gain could be short-lived, traders said on Tuesday. May robusta coffee settled up 3.4 percent at $1,413 per tonne on Monday, gaining for a second day in a row.
The increase raised robustas to 30,900-31,200 dong ($1.39-$1.40) per kg in Daklak, Vietnam's top growing province, from 30,700-31,100 a week ago, leading to more purchases by Vietnamese firms.
"Hoarding is rising with hopes of more price gains, and selling volumes can be higher if a price uptrend is established," said a trader in Daklak.
But the robusta futures price gain, which came ahead of the March contract's first notice day on Tuesday, could be short-lived, said independent analyst Nguyen Quang Binh.
Robusta grade 2, 5 percent black and broken was quoted at premiums of $50-$60 a tonne to the May contract, against a premium of $50 a week ago.
Bids stood at premiums of $45-$50 per tonne, compared with bids at par with London to a premium of $10 a tonne last week.
Vietnam is seen exporting 150,000-160,000 tonnes (2.5-2.67 million 60-kg bags) of the commodity this month, versus an estimated 120,000 tonnes shipped in holiday-shortened February, traders said.
The Central Highlands, where the dry season started earlier than usual late last year, will be fighting serious dryness in coming months, a state forecaster and traders said, in line with previous industry forecasts.
The El Nino weather phenomenon is expected to delay the arrival of the rainy season in the Central Highlands coffee belt by 10-15 days this year, said Pham Vu Tuan, an official at the regional weather centre.
Farmers, who normally water their crops in three to four phases over the dry season, have been watering coffee trees during the second phase, or have started the third phase in some areas, but water has been in short supply, traders said.
"The time for each watering phase has been increasing, indicating a water shortage," the Daklak-based trader said.
Water for coffee is mostly pumped from underground, until rain returns in late April.