Vietnam's coffee premiums rise as sellers hold back supply

Trading in Vietnamese coffee moderated after a brief pickup early in the week on anticipation of higher prices, while in Indonesia supply remained tight on growing domestic consumption, traders and industry officials said. Harvesting of the 2015/2016 crop in Vietnam, the world's top robusta producer, has ended, according to the traders, meaning there is ample supply for the robusta variety used mainly for making instant coffee.
"Sales should have been picked up strongly but domestic prices edging up now have raised hope among growers of further gains so they hold back," a trader at a foreign firm in Ho Chi Minh City said. Vietnamese robusta rose to 32.2-32.5 million dong ($1,435-$1,449) a tonne on Thursday, from 31.6-32.5 million dong on Tuesday, after the ICE March robusta future settled up 0.6 percent at $1,457 per tonne on Wednesday.
Robusta grade 2, 5 percent black and broken beans, traded at premiums of $40-$50 a tonne to the ICE March contract, up from premiums of $30-$40 early this week and $20-$35 a week ago. Exporters also sought to sell the beans at premiums of $25-$30 a tonne to the ICE May contract. Robusta grade 1, similar to Sumatran coffee, was offered at premiums of $90-$100 a tonne.
In Indonesia premiums narrowed even as supply has tightened because of growing domestic consumption, traders and an industry official said. Sumatran beans grade 4, 80 defects, were offered at a premium of $100 a tonne to London futures, down from premiums of $130-$150 a tonne last week. The beans were at discounts of $30-$50 a tonne a year ago. An individual Indonesian will consume 1.6 kg to 1.7 kg of coffee this year, up from 0.8 kg about a decade ago, said Pranoto Soenarto, an official at the Association of Indonesian Coffee Exporters and Industries (AEKI) on Wednesday. Overall, Indonesia's consumption in 2016 is estimated at 200,000 tonnes.
Indonesia's coffee output this year could increase 9 percent to 600,000 tonnes, the AEKI chairman Irfan Anwar said on Wednesday. Output from Vietnam's 2016/2017 coffee crop could be affected due to low domestic prices, said Chairman Luong Van Tu of the Vietnam Coffee and Cocoa Association on Thursday. "Farmers may not take good care of trees as their selling prices have been low, and some may have faced losses already," Tu said. Last year coffee prices in Vietnam fell 16 percent, while the country's coffee exports dropped nearly 30 percent from 2014 to $2.57 billion, based on government data.