Premiums for Vietnamese coffee rose this week on speculative buying as traders took advantage of lower prices to build stockpiles amid concerns of lower supply from next year's crop because of dry weather in 2015, traders said Thursday. Vietnamese robusta grade 2, 5 percent black and broken beans, was traded at premiums of between $30 and $50 a tonne to the ICE March contract, from premiums of $20-$40 a tonne early this week and $20-$25/tonne a week ago.
The March contract ended up 0.53 percent at $1,515 a tonne on Wednesday. The contract is down 26 percent this year. Robusta grade 1, similar to Sumatran coffee, was offered at premiums of $80-$100 a tonne. Some growers and Vietnamese industry officials said watering for the next 2016/2017 crop cycle could be affected due to low underground water reserves, following low rainfall this year. The low rainfall is an effect of the El Nino weather phenomenon that typically brings dry conditions to Southeast Asia.
"Some (buyers) are taking Vietnamese coffee and domestic speculators have also begun stocking up as they see the current low prices and a possible impact from the dry weather on the next crop," a trader at a foreign firm in Ho Chi Minh City said. Vietnam's coffee harvest is about half completed, with up to a third of the 2015/2016 crop ready for exports. "The harvest is more or less than 50 percent completed, while around 30 percent of the crop has been processed," the trader in Ho Chi Minh City said.
It takes a week to 10 days to pick up, dry coffee cherries and transport them in bags to Saigon Port for loading. The harvest could end by early January. Domestic prices have been stable this week at 33.0-33.5 million dong ($1,464-$1,486) per tonne in Daklak, Vietnam's largest growing province. At 33 million dong the price is the lowest since November 2013. Coffee exports from Indonesia, Vietnam's rival robusta producer, are expected to be quiet until mid-January as supply was in the period between crop cycles, traders said.
"The market is getting quiet because we're entering the holiday season," said a Semarang-based trader. "The robusta volume is a bit decreasing. This will continue until mid-January." Sumatran beans grade 4, 80 defects, are offered at premiums of $140-$160 a tonne to London futures, against premiums of $150-$200 last Thursday.