Asian coffee market faces tight supply

Asian coffee market is facing tight supply in key robusta- producing nations as farmers in Vietnam slowed sales while Indonesia's stocks are depleted, traders said on Thursday. Vietnamese coffee farmers held back sales following a decline in global prices and also on expectations that a dry weather could help boost prices in coming weeks, traders said.
Premiums of Vietnamese robusta grade 2, 5 percent black and broken rose to $50-$70 a tonne to ICE May contract, from premiums of $40-$50 last Thursday. A premium of $70 is the highest since mid October 2015, based on Reuters data. Beans grade 1, similar to Sumatran coffee, stood at premiums of $95-$110 per tonne.
"Farmers are harvesting pepper, so they focus more on selling the spice, while coffee can be kept longer," a trader at a foreign firm in Ho Chi Minh City said. Pepper fetched around 140,000 dong ($6.28) per kg, far above prices of robusta beans which stood at 30,600-30,900 dong/kg on Thursday in Daklak, the country's top growing province. More coffee farmers have been switching to pepper in the past year to take advantage of the spice's higher prices.
Farmers are also expecting coffee prices to gain in coming weeks as dryness at the peak of the ongoing dry season in the Central Highlands coffee belt could bring serious drought and delay the rainy season, traders said. May robusta coffee settled up 1 percent at $1,391 per tonne on Wednesday. In Indonesia, premiums stood unchanged at $300 per tonne of beans grade 4, 80 defects to the May contract, against premiums of $250-$300 a week ago.
"It didn't change because there is no stock. Prices will remain stagnant until April because there is no coffee," said one trader in Bandar Lampung, the country's top growing region. Despite the early harvest in Indonesia, supply of newly picked beans is insignificant and could only pick up later this month when the harvesting scale widens. Indonesia's domestic consumption of 250 million has been rising, taking around 40 percent of output, while the country produces 600,000 tonnes a year, or 35 percent of Vietnam's total. Combined output from Vietnam, the world's top robusta producer, and Indonesia makes up a quarter of the world's total coffee production.