Coffee trading in Vietnam has been frozen due to high prices and thin stocks and the world's second-largest producer after Brazil could see shipment in calendar 2011 drop more than 5 percent, traders and an industry group said on Tuesday. Exports are estimated to reach 1.15 million tonnes, or 19.17 million bags, in calendar 2011, down 5.43 percent from last year, the Vietnam Coffee and Cocoa Association (Vicofa) said after a meeting last Friday to review export activities.
The estimate is below a forecast of 1.2 million tonnes, or 20 million bags, by the Agriculture Ministry. Vicofa said arabica exports would reach around 40,000 tonnes, or nearly 670,000 60-kg bags, of the total shipment. Vietnam is the world's top producer of the bitter variety used mainly for making instant coffee. Its coffee crop year runs from October to September while government statistics use the calendar year to December.
Vicofa will also seek government approval to fund export firms to stockpile between 200,000 and 300,000 tonnes of coffee at the start of the 2011/2012 crop, it said in a statement. Last December the agriculture ministry, at Vicofa's behest, had sought government approval to stockpile between 300,000 tonnes and 500,000 tonnes of coffee to help reduce pressure on suppliers and support prices.
But the plan did not come through as prices in December were already about 75 percent above farmer production costs and exporters would need nearly $1.8 billion for their purchase. On Tuesday robusta prices eased to 45,700-45,900 dong ($2.2) per kg in the Central Highlands coffee belt, from 46,500-46,600 dong a week ago and well below the record high of 52,000 dong reached on May 11. But prices have soared nearly 55 percent from the same period in 2010. "Market trading has been stuck for a month now," a trader in Ho Chi Minh City said.
Traders said it has been easier to buy coffee now from foreign companies which have established warehouses in Vietnam than from Vietnamese export firms, due to tight supply. Stocks have been thinning in Vietnam following strong exports thanks to good prices during the first half of 2011. Vicofa said loading volume between January and June jumped 32 percent to 761,000 tonnes, citing customs data.
Foreign firms offered Vietnamese robusta grade 2 at premiums of between $100 and $140 a tonne to London's September contract, while the premium would be around $220 a tonne if domestic prices are used, having widened from $200 last week. September contract closed down $12 at $2,050 a tonne on Monday. "It is better to buy from foreign firms now because they have stored better quality beans while the beans on domestic markets do not have good quality now when the crop year is ending and volume is also small," another trader said.
Vietnam will begin its next 2011/2012 crop harvest in November. Vicofa said a quarter of Vietnam's coffee area was covered with old trees which will provide lower yields. Vietnam is forecast to harvest 18 million bags from the next 2011/2012 crop, well below market projections, Vicofa Chairman Luong Van Tu said in late June. 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.
Coffee growers have also faced a jump of 20-30 percent in production costs due to higher prices of fertiliser and diesel - used for water pumps during the tree-watering period - as well as high loan interest rates, the statement said. Vicofa said it would start collecting $2 from exporters for each tonne of their exported coffee as of January 1, 2012 and use the proceeds to support coffee re-planting, trade promotion and also to finance the stockpiling scheme.
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