Coffee prices in Vietnam dropped to their lowest level in almost 14 weeks on Tuesday as expectations of a large harvest in top grower Brazil raised worries about global oversupply. Heavy rain is giving a final boost to the Brazilian crop, which is due for harvest in the next few weeks. Traders also said Vietnam's 2013/2014 crop harvest may start early and that its output could rise beyond initial forecasts.
Robusta fell to 41,200-41,800 dong ($1.96-$1.99) per kg on Tuesday in Daklak province, down about 3 percent from a week ago. The bottom end of the range is the lowest price since 40,800 dong per kg on February 20, based on Reuters data. Daklak is Vietnam's largest coffee producer and accounts for about a third of the country's output.
The Liffe July contract lost 1.8 percent last Friday to close at $1,952 a tonne. New York July Arabica touched a fresh three-year low on Friday before finishing down 2.2 percent at $1.2725 per lb. Both markets were closed on Monday due to holidays. Exporters in Vietnam were offering premiums of $60-$70 a tonne to London's September contract, up from premiums to July of $30-$50 a tonne last week.
That would put Vietnam's robusta grade 2, 5 percent black and broken at $2,040-$2,050 a tonne, free-on-board basis, narrower from $2,035-$2,055 a week ago. A higher-than-expected export volume this month plus promises of a bumper crop in the 2013/2014 season would keep a lid on coffee prices, traders said.
May coffee exports fell 46 percent from a year ago to an estimated 110,000 tonnes, or 1.83 million 60-kg bags, the government said on Friday. That was still above market expectation of around 100,000 tonnes. Coffee cherries also now look better than previously expected, suggesting a bumper 2013/2014 crop, traders at foreign firms said after recent crop surveys. They dismissed a Vietnam Coffee and Cocoa Association forecast that said the 2013/2014 output would fall by as much as a third due to drought.
"Water supply has turned out to be very good and the crop may be bigger than the current one," said a second trader in Ho Chi Minh City who had just concluded a crop survey in the Central Highlands coffee belt. Another trader said the next harvest could start before October because rains had returned earlier than usual to the region.
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