Coffee harvesting in Vietnam, the world's largest robusta producer, is yet to pick up pace due to low prices and cloudy weather, while Indonesian coffee premiums have widened this week, traders said on Thursday. In Vietnam's Central Highlands coffee belt between 5-7 percent of the planting areas has been harvested, slightly slower than last year, said a Vietnamese trader in Daklak, the country's top growing province. The process often peaks from mid-November.
Robusta edged up at $1.59-$1.61 per kg in Daklak on Thursday, trailing the ICE January contract that closed up 0.25 percent at $1,632 per tonne on Wednesday. The January contract has risen 4.3 percent so far in the 2015/2016 season that began on October 1, faster than the 0.4 percent gain of Vietnamese coffee prices in the same period, based on Reuters data.
Domestic prices are still below farmer's selling target price of $1.70-$1.79 per kg. Premiums of robusta grade 2, 5 percent black and broken beans widened to $20-$40 a tonne to the January contract, from premiums of $10-$20 a week ago. Robusta grade 1, similar to Sumatran coffee, stood at premiums of $70-$90 a tonne. "Some firms short for November delivery have been buying, while fresh beans are not much yet," the Daklak-based trader said. In Indonesia, farmers were holding small stocks after the harvest ended, while buying demand remained weak, traders said. Sumatran robusta grade 4, 80 defects are quoted at premiums of $110-$120 a tonne to the ICE January contract, widening from a premium of $100 a week ago.
The London-based International Coffee Organization raised its 2014/15 global output estimate to 143.3 million 60-kg bags, from 141.7 million bags previously estimated, mostly due to higher output in Colombia, it said in its October report. "A lack of rain resulting from El Nino could reduce production next year, with bad weather also potentially affecting production in Indonesia and Vietnam," the report said.
In Vietnam, underground water is low which could also affect the next 2015/2016 season. "Watering will be critical as water shortages are expected," the Daklak-based trader said. But it is still early to forecast outputs in Vietnam and Indonesia, which account for a combined 25 percent of global coffee exports, traders said. "The harvesting time is different, also the flowering stage are related to the altitude of the area where these plants grow, some of them are affected, some are not," an Indonesian trader said.