Vietnam premiums dip; Indonesia offers new crop

Premiums for Vietnam’s robusta coffee slipped from an all-time high ahead of the new harvest in October, while trading slowed to a trickle in neighboring Indonesia before a Muslim religious festival, dealers said on Wednesday.
Vietnam’s grade 2, 5 percent black and broken beans for August shipment were $110 a ton above London’s September contract, down from a record at $220 last week. Premiums above November contract were at $90 to $110.

Indonesia’s grade 4, 80 beans for prompt delivery held at record premiums of $400 to $500 a ton above the September contract, but offers for delivery early next year stood at $60 a ton above futures.

“Indonesia has been very quiet ahead of the Eid al-Fitr. There’s not much traded at the moment,” said a dealer in Singapore, who sells robusta from Vietnam and Indonesia.

“But Indonesian price for prompt delivery is more expensive than Vietnam’s, and they just give you the outright prices.”

Another dealer in Singapore said there were no reports of deals for next year’s delivery either, as trading slowed down ahead of the Eid al-Fitr celebration later in August, marking the end of the fasting month.

The next harvest in Indonesia, the world’s second-largest robusta producer after Vietnam, is expected to start again in January or February next year.

Indonesia’s coffee exports could fall about a third to 300,000 tons in 2011, as supply constraints will lead to tight stocks at the end of the year, the Indonesian Coffee Exporters Association (AEKI) said.

Exporters in the main growing island of Sumatra have turned to their own inventories to meet shipment commitments after erratic weather earlier this year led to an early harvest, which yields poor quality beans.

Vietnam delivery delays

While some Indonesian exporters have begun quoting beans for next year’s delivery, dealers in Vietnam have yet to offer robusta from the new harvest, which is expected to start in October, a month earlier than usual.

Buyers are also cautious after some exporters in Vietnam refused to deliver on previous deals and instead sought to resell the beans at higher differentials.

At least 70,000 tons of coffee shipments from Vietnam have either been delayed or not delivered since July after thinning stocks ahead of the new harvest and strong prices prompted farmers as well as shippers to renegotiate contracts.

“If you really want to buy beans from the next crop, you can definitely find them. The question is whether you can continue buying them in the next few months,” said a dealer in Hong Kong, adding that buyers were worried that suppliers could arbitrarily breach the contracts.

“That’s why buyers want to see if the coffee is actually there before buying it.”

Week-ahead

Premiums for Vietnam robusta could fall further next week on prospects of another bumper crop.

Vietnamese beans are normally offered at a discount to London futures, but their value started to climb in June on strong exports earlier this year.

A Reuters poll in July showed Vietnam could see its biggest harvest ever with a median estimate of 21 million bags, up from 18.5 million bags in 2010/11, and well above its 2006/07 record crop at 19.3 million bags, ICO data shows.
Reuters

Tags: Vietnam Coffee, Vietnam coffee prices