Bloomberg News

Volcafe Sees Vietnam Coffee Growers Holding Back Sales Even More

January 25, 2013

Coffee farmers in Vietnam, the world’s largest producer of the robusta variety used in instant drinks, will hold back beans even more after Tet, the festival that marks the Lunar New Year, according to Volcafe Ltd.

Sales have already been held back because “farmers have made their money and are under no pressure to sell further volumes at prices that do not suit them,” Winterthur, Switzerland-based Volcafe, a unit of ED&F Man Holdings Ltd., said in a report e-mailed today. Robusta futures on NYSE Liffe climbed 6.3 percent last year and are little changed this year.

“Retention from farmers is expected to increase after Tet,” Volcafe said in the report.

Growers in the Southeast Asian nation will probably sell about 40 percent of their production before Tet, which starts Feb. 10, Amsterdam-based trader Nedcoffee BV estimates. They normally sell 50 percent, Nedcoffee has said. The price of beans in Dak Lak, the main growing region, is 38,900 dong ($1.87) a kilogram (2.2 pounds), down 11 percent from last year’s high of 43,600 dong a kilogram in July, data from the Daklak Trade & Tourism Center show.

Vietnam’s coffee exports may climb to 191,000 metric tons this month, up 71 percent from the same period a year earlier, the Ministry of Agriculture and Rural Development said. Shipments rose 38 percent to 1.73 million tons last year.

“Despite the huge shipping volume, the selling pressure before Tet was hardly noticeable,” Volcafe said.

Indonesia Rain

In Indonesia, the third largest robusta grower, rain that reached coffee growing areas may last until February, Volcafe said in the report, citing a local weather forecast.

“If rain continues for a long time, the new crop from southern Sumatra might possibly be lower by 5 percent to 10 percent over the last season,” Volcafe said. The 2013-14 crop starts in April in Indonesia.

Bean deliveries from farms slowed to 700 to 800 tons from 900 tons to 1,000 tons a week earlier, Volcafe data showed. Indonesian coffee for February and March shipments was at a premium of $110 a ton to the price on NYSE Liffe, according to the report. That is down from a premium of $130 a ton last week.

“Exporters started to offer forward differentials of all grades at lower levels for April onwards and some business was concluded,” Volcafe said. Differentials refer to a discount or premium paid to obtain physical coffee in relation to futures.

Robusta coffee for March delivery was little changed at $1,945 a ton by 3:44 p.m. in London.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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