Vietnam's coffee prices stood stable this week, with thin domestic supply capping exporters' sales, while premiums narrowed in Indonesia following gains in London's futures market, traders said on Thursday. Coffee exports from top robusta producer Vietnam have been rising, cutting the country's stocks while the drought now affecting the coffee belt could worsen next month and reduce the next 2016/2017 output, traders said.
"There is a risk that a coffee shortage will arise (in the next season)," Do Ha Nam, general director of Intimex, Vietnam's top coffee export firm, told Reuters. Foreign buyers already found it difficult to buy Vietnamese robusta for outright shipments or for delivery from July onwards as exporters did not want to sell for outright shipment as well as for further deliveries, having faced tight domestic supply, said Nam.
He forecast the country's annual exports at "no more than 1.2 million tonnes". Shipment totalled 1.3 million tonnes in the previous 2014/2015 season. Coffee exports from October 2015 to February 2016 jumped 20.2 percent to 634,300 tonnes from the previous year, based on government statistics. The dry season, the worst to hit Vietnam's Central Highlands coffee belt in 30 years, has brought drought to provinces of Gia Lai and Kontum, which are smaller growing areas in comparison with provinces of Daklak, Lam Dong and Dak Nong.
"The dryness severity is increasing every day, and in April, it could spread to Daklak and Dak Nong," said Nam, also a deputy chairman of the Vietnam Coffee and Cocoa Association. Premiums of robusta grade 2, 5 percent black and broken stood at $40-$50 a tonne to ICE July contract, from premiums of $50-$60/tonne last week. Robusta grade 1, screen 16, similar to Sumatran coffee, was quoted at premiums of $70 a tonne. ICE May robusta coffee settled up $1, or 0.1 percent, at $1,515 per tonne on Wednesday, down from an 11-week high of $1,516 hit on March 22.
In Indonesia, premiums dived from a 15-month high, that was hit last week, following recent futures gains and a weakening rupiah, while buying demand did not change much, traders said. Premiums of beans grade 4, 80 defects eased to $250-$320 a tonne, from premiums of $300-$350 last week, in which $350 was the highest since at least December 2014, according to data on Reuters. The premiums eased due to "a little increase in the local price amid London rally, while rupiah is weakening", said a trader in Lampung.