Vietnamese coffee premiums rise; domestic prices fall

Premiums on Vietnamese coffee to robusta futures rose this week as domestic prices fell to near a seven-week low, while buying demand weakened, traders said on Tuesday. Robusta futures were firm on Monday after buy orders were triggered and a one-minute surge lifted prices 3 percent, although gains were pared by the close. The September contract settled up 0.2 percent at $1,678 a tonne after surging to $1,730.
Robusta beans in Vietnam, the world's top producer of the variety, edged up to 35,300-36,300 dong ($1.62-$1.66) per kg on Tuesday in Daklak, the country's largest growing province, from 35,200-36,200 dong the previous day. The price of 35,200 dong was touched on Saturday, mirroring a fall to $1,675 a tonne, the lowest since June 1, on the September futures contract.
Daklak prices are below the level of 39,000 dong at which farmers and speculators had been expected to unload stocks. Many have been hoarding beans since late February in the hope of higher prices. "Farmers are not selling and buying agents are also not selling, which has in turn widened premiums," said a trader at a European firm in Ho Chi Minh City. He was referring to the middle men who buy coffee from farmers, store it and then resell to exporters. Buying agents have been playing a larger role in speculation this year.
Exporters sought to sell Vietnamese robusta grade 2, 5 percent black and broken at premiums of $60-$70 a tonne to the September contract, up from $40-$50 a tonne a week ago. Premiums and futures usually move in the opposite direction. Vietnam's slowing coffee exports in recent months could help boost sales by Brazil or Indonesia, where the bitter robusta variety is also grown, traders said.
"Vietnam is losing its market share but farmers do not care about that," another trader in Ho Chi Minh City said. "They care only about their selling price." Vietnam's coffee exports dipped 1.2 percent in June from the previous month to 104,200 tonnes, bringing shipments in the first nine months of the 2014/2015 season to 979,700 tonnes, down 25.7 percent from a year before, government data shows. The coffee crop year runs from October to September.