Vietnam, the world's second-largest coffee producer, plans to take 300,000 tonnes of the beverage out of the domestic market in a bid to shore up prices, an industry official said on Friday, after prices hit a three-year low. The stockpiling of 300,000 tonnes (5 million 60-kg bags), or a fifth of the 2013/2014 crop output, which traders have forecast at a record 25 million bags, could give a short-term boost to prices, which have been at multi-year lows.
Favourable weather for the vital flowering phase of top grower Brazil's coffee trees has supported expectations for a third successive large crop. This is helping to squeeze world bean prices, particularly in combination with expectations for a record robusta crop from Vietnam's current harvest and improved yield in top washed-arabica grower Colombia.
On Friday Vietnamese robusta beans fell to 29,800 to 30,200 dong ($1.41-$1.43) per kg, the lowest since October 19, 2010, after the Liffe January contract settled down $27 a tonne at a session low of $1,482, just above Tuesday's low of $1,462, its lowest in more than three years. "We have agreed with the Agriculture Ministry to submit the plan to the government for approval," Luong Van Tu, chairman of the Vietnam Coffee and Cocoa Association (Vicofa), said by telephone from Ho Chi Minh City.
The coffee would be bought and kept in stockpiles for six months, he said, adding that government approval would be in place in about a month. Vietnam, whose coffee production makes up about 15 percent of world output, last stockpiled beans three years ago and domestic prices gained nearly 20 percent as they tracked gains in London robusta futures.
The country did not do any stockpiling in the 2011/2012 and 2012/2013 seasons as prices held at high levels. "The stockpiling of 300,000 tonnes would require huge funds and we are not sure if banks will agree," said a trader at a foreign company in Ho Chi Minh City who attended a Vicofa meeting.
At the meeting, industry officials also agreed to propose that banks give loans to farmers to keep them from dumping beans on the market when prices are low, Tu said. Each farming family should be given 50 million dong ($2,370) in loans to help them store their beans longer, he said.
Vietnam has begun harvesting its new 2013/2014 crop, while the stocks carried forward from the previous crop were far smaller than market expectations. Vicofa data put the stocks of old-crop beans at below 100,000 tonnes, Tu said, compared with traders' estimates of 250,000 tonnes. Traders regard Vicofa's figures as underestimates made in an effort to boost prices. Market analysts expect Vietnam's 2013/2014 output to rise at least 10 percent to 28 million bags, versus the 20 million estimated by the association.
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