Vietnamese coffee premiums edged up on tight supply, while thin stocks increased premiums in Indonesia, traders said, but rainfall early this week in Vietnam and forecasts of more before early May are expected to alleviate supply concerns. A drought brought on by the El Nino weather pattern in Vietnam's Central Highlands coffee belt, which raised concerns about the next 2016/2017 crop output, could weaken late this month or in May when rainfall returns to the region.
Farmers have been holding on to stocks, hoping news of dry weather could further boost prices. Underpinned by the dry weather in top robusta producer Vietnam, the ICE July robusta coffee closed up 0.8 percent at $1,502 per tonne on Wednesday. The drought has ruined or reduced yields on a total of 40,000 hectares (98,800 acres) of coffee, or 7 percent of the planting area in the Central Highlands coffee belt, which produces 80 percent of Vietnam's output, the Vietnam Coffee and Cocoa Association said.
Premiums of robusta grade 2, 5 percent black and broken rose to $55-$60 a tonne to the ICE contract, from premiums of $40-$50/tonne early this week, but little changed against premiums of $50-$60 last Thursday. "The premiums gained as domestic supply has been tight," a trader at a foreign firm in Ho Chi Minh City said on Thursday. Robusta grade 1, screen 16, similar to Sumatran coffee, were quoted at premiums of $105-$110 a tonne.
More rainfall is forecast in coming days in the central highland provinces of Lam Dong and Dak Nong, Vietnam's second- and third-biggest growing provinces after Daklak, provincial weather stations reported. But it was still early to assess the prospect of Vietnam's 2016/2017 crop, although more rain could alleviate supply concerns, said Hamish Smith, commodities economist with Capital Economics.
In Indonesia, premiums of beans grade 4, 80 defects rose to $280-$300 a tonne, from premiums of $250-$280 last Thursday, due mostly to thin stocks at warehouses, traders said. The volume of fresh beans arriving in Lampung province in Indonesia's key growing region is picking up, but domestic producers have bought most of the supply, traders said.