Vietnam's coffee prices rallied on Thursday as supplies tightened amid a drought that may lower this year's exports, while premiums narrowed in Indonesia due to low stock levels, traders said. The country's Central Highlands coffee belt is facing the worst drought in 30 years, heaping pressure on its limited supply. About 70,000 hectares in the Daklak province alone had no water, and many trees died, Nguyen Xuan Thai, general director of a Daklak-based coffee export firm, told Reuters.
"The situation may be worse next month," he said, adding the country's coffee export this year must be lower than in 2015. Premiums of robusta grade 2, 5 percent black and broken advanced to $50-$60 a tonne to ICE July contract, from premiums of $40-$50/tonne last week, due to tight supply, traders said. Vietnam will export an estimated 160,000 tonnes (2.67 million 60-kg bags) of coffee in March, up 18.8 percent from a year earlier, the government said on Friday, in line with market expectations. But, the country's annual exports could fall to 1.2 million tonnes from 1.3 million tonnes, said Vicofa deputy chairman Do Ha Nam. ICE May robusta coffee settled up 0.5 percent at $1,504 per tonne on Wednesday, Reuters data showed.