Vietnamese coffee prices edged up slightly on Tuesday, drawing support from New York arabica gains with the London robusta market closed for a holiday and news of a new wave of domestic market defaults, traders said. Robusta beans stood at 24.5-25.0 million dong ($1,286-$1,312) per tonne in the top growing province of Daklak, against 24.6-24.8 million dong last Tuesday, after May arabica reached a 10-week high at $1.3965 per lb.
The London robusta futures market, whose movements are closely tracked by Vietnamese robusta prices, reopens on Tuesday after being shut on Easter Monday. Discounts to London's July contract widened to $30 a tonne on Tuesday from $20-$25 last Friday, leaving Vietnamese robusta grade 2, 5 percent black and broken at $1,360-$1,370 a tonne, free-on-board, from $1,330-$1,365 a tonne a week ago.
Beans for outright shipment rose to $1,355 a tonne, FOB, from $1,330 last Tuesday, thanks to New York gains. Traders said the larger discount in place this week took into account domestic market risks as several buying agents have declared bankrupt in Daklak since February.
Higher coffee prices in Vietnam put pressure on buying agents who had sold forward stocks to exporters on margin at low prices, but were now unable to pay farmers the balance as prices recover, traders said last Tuesday. Buying agents' defaults can disrupt the supply chain to Vietnamese exporters, making it harder for them to seek beans two months after the harvest end and as stocks have been more than halved, traders said.
FARMERS SUFFERING: More farmers could fall victim to the defaults as wealthier growers gave funds to agents to speculate on coffee prices, traders and farmers told Reuters last Friday. Nguyen Tan Dinh, a 47-year-old farmer, said he lost 15 tonnes of coffee and 50 million dong ($2,625) in cash with a small buying agent in Daklak district of Krong Pak in early March.
Last week farmers discovered another two agents holding a combined 500 tonnes of coffee could not repay in the Daklak district of Ea Hleo, the official Thanh Nien newspaper reported on Monday. The new wave of defaults came at a time when farmers need cash to buy fuel for watering coffee trees during the peak time of a dry season that ends in a month. The next harvest for the 2010/2011 crop is due to start in October.
But scattered showers in the Central Highlands in the past week have helped farmers save the production cost, farmers said. Dinh said yield in his next harvest could bounce back to the level of the 2008/2009 crop of around 4 tonnes per hectare from 2.5 tonne in the last crop, which was hit by adverse weather.
Dinh appeared to be more optimistic than a major coffee exporter in Daklak, who told Reuters last Friday that Vietnam's 2010/2011 coffee crop would be little changed from the last harvest as lower investment by farmers due to weak prices will hurt yields.
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