A small quantity of Vietnamese robusta from the old crop changed hands at premiums to London futures, but roasters turned their backs on beans from the next harvest due to the prospect of a bountiful supply and persistent fears of defaults, dealers said on Thursday.
The Swiss Coffee Trade Association plans to alert Swiss and Vietnamese authorities to defaults on coffee contracts by exporters in Vietnam, which have cost the coffee industry millions of dollars, the president of the association said.
"Shippers used to buy beans even when they were still in the trees. But because of the defaults that's we've seen this year and everything, shippers have cut down on this kind of practice," said a dealer in Hong Kong.
"I think at the moment, people just wait and see. The market is looking for a huge crop in Vietnam and there's still a lot of stocks in Europe. So traders think the Vietnamese will have to sell coffee at cheaper prices."
Vietnam's new crop Grade 2, 5 percent broken beans were little changed at discounts of between $50 and $90 below London's January contract as an early harvest started in several provinces outside the Central Highlands coffee belt.
Domestic exporters were estimated to have defaulted on a around 150,000 to 200,000 tonnes of coffee in the 2009/10 crop and Vietnamese traders have estimated around 70,000 tonnes of the crop ending September 2011 have faced delays or defaults.
Dealers said some exporters in Vietnam, the world's largest robusta producer, refused to deliver on previous deals and instead sought to resell the beans at higher differentials, while some failed to honour terms of shipments.
The second-largest robusta producer, Indonesia, offered beans from the new crop due to start in December or January at a $60 premium, but trading practically stopped this week as farmers and dealers celebrated the Muslim Eid-ul-Fitr festival in the world's most populous Muslim nation.
Vietnamese beans from the old crop fetched premiums of $70 to $80 to London's November contract for prompt delivery, down from a record of $220 in August.
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 the 19.3 million bags of 2006/07, its previous record, according to ICO data. "Beans against the November contract are still offered at premiums, and people are buying them to cover shorts," said a dealer in Singapore. "But for the new crop starting in the second half of October, we can see prices of minus $50 to minus $70."
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