Coffee trade in Vietnam, the world's second-largest producer, has ground to a standstill in the past week as sellers held on to their stocks in expectation of higher prices, traders said on Tuesday. They said growers and speculators were reluctant to sell at current prices of around 18,000 dong ($1.14) per kg although some said they could buy from growers on Tuesday at 18,200 dong per kg but only in small quantities of about 12 tonnes.
The sellers are betting that falling supply as the end of the crop year approaches and expectations that coffee output would fall in the next crop year will support prices.
Traders said sales were expected to pick up again in August or September ahead of the new harvest in October. "If prices hit 19,000 dong, we are certain that everyone would sell immediately to get rid of the old beans and get ready for new stocks," said a trader from Daklak, the country's top coffee growing province.
Growers and speculators who were able to sell at 19,300 to 19,500 dong per kg in June would not accept less despite the decline in benchmark London coffee prices last week.
Prices in Vietnam, the world's biggest producer of robusta coffee, normally track London price trends, where the benchmark September contract shed $2 per tonne to close at $1,233 a tonne on Monday as fears about cold weather in major coffee producer Brazil receded. On Tuesday exporters sought to buy coffee in Daklak, the key growing province, at 17,870 dong ($1.13) per kg, slightly lower than a week, and down from 18,500-18,600 in mid-June. "It is very hard to buy the beans at the current prices as growers and speculators think the longer they hold on to their stocks, the higher prices will get," said another trader from Daklak.
Traders said sales were expected to pick up in August or September before the harvest started in October, as farmers would need cash to pay for extra labour during the bean picking.
The US Department of Agriculture has estimated Vietnam will yield 12.2 million bags of coffee, or 732,000 tonnes, in the upcoming harvest, down from 14.17 million bags in the current crop year.
Vietnam's crop year runs between October and September. Traders in Daklak estimated only around 70,000 tonnes of stock is still in warehouses in the region. While fresh beans could become available in October, the harvest in the Central Highlands region, which produces 80 percent of Vietnam's coffee, peaks from mid-November and ends in January.