Farmers in Vietnam, the world's largest robusta producer, are holding back about 60 percent of the crop as they wait for domestic prices to improve, trading house SW Commodities said on Monday, more than double normal stocks.
"The Vietnam situation is unusual," said Herve Touraine, a dealer at SW Commodities, a unit of Hong Kong-based conglomerate Sun Wah Group.
"Our monitoring indicates that between 650,000 and 700,000 tonnes of coffee are still in the farmers' hands - a figure absolutely abnormal at this period of the year." Touraine said farmers normally keep around 200,000 to 300,000 tonnes of coffee beans after Tet, Vietnam's biggest festival, which marks the Lunar New Year that fell in January.
Farmers were now waiting for a rebound in domestic prices, which have fallen to around 37 million dong a tonne ($1,912), versus 40 million a year ago.
Vietnam is forecast to produce 18.5 million 60-kg bags of coffee (1.11 million tonnes) in the crop year to September 2012, down from 19.467 million bags in the previous crop year, according to the International Coffee Organisation.
Bulging stocks in Vietnam could weigh on London robusta futures, which have been under pressure from worries about the global economy, traders said. London futures have dropped nearly 6 percent since hitting a six-week high of $1,950 a tonne in late January.
"The high inflation might be an explanation, albeit not the only one. A coffee bag is being considered sometimes as a protection against a possible internal currency devaluation," said Touraine
"But the problem is that with the current market's direction, heading south week after week, the farmers should realise it is their coffee bag that is devalued."
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