Vietnam coffee prices climbed about 2 percent to 38,500-38,600 dong ($1.83) per kg on Tuesday, the highest since August last year, extending a rally from late last week, traders said. Prices in Vietnam, the world's top robusta producer, followed a surge on global coffee markets fanned by concerns over potential crop damage from dry weather in top grower Brazil.
Robusta rose from Monday's 37,800 dong per kg in Daklak, the top growing province in Vietnam's Central Highlands coffee belt, to the highest since August 19, 2013 when the beans stood at 40,200 dong per kg, based on Reuters data. However, farmers were holding back on sales in anticipation of further price rises.
"Farmers dare not sell much now as they've seen losses by those who sold the previous day," a Vietnamese trader said by telephone from Buon Ma Thuot, the capital of Daklak province. May arabica futures on ICE jumped 4 percent to close at $1.7635 per lb on Monday, and the May robusta contract on Liffe rose 2.5 percent to settle at $2,003 a tonne on Monday, after touching a nine-month high at $2,045.
Farmers had aimed to speed up sales once prices reached 40,000 dong per kg, but given the gains of recent days they were now targetting a price 45,000 dong per kg, farmers and traders said. He said farmers who had been able to keep beans until now were not under much pressure to sell for cash.
Vietnamese exporters were also reluctant to sell for loading too far in the future, such as April onwards, because global prices were reacting to weather news in Brazil, which could change swiftly, the first trader said. Discounts of Vietnamese robusta grade 2, 5 percent black and broken, widened to $50-$90 a tonne to the May contract, from the $40-a-tonne discount traded last week. Vietnamese coffee farmers have been watering trees for the next 2014/15 crop cycle while the dry season is progressing ahead of its peak in March/April in the Central Highlands.
The El Nino weather pattern that can trigger drought and wither crops in Australia, Southeast Asia, India and Africa is also seen increasingly likely to return by the middle of 2014. Traders in Vietnam said there have been no signs of any serious water shortage in the coffee belt region, which produces 80 percent of Vietnam's total output. The region often sees rain returning from early May.
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