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Coffee Farmers in Vietnam Curb Sales Amid Fast Crop Progress

Coffee growers in Vietnam, the world’s biggest producer of the robusta variety used by Nestle SA (NESN) in instant drinks, are curbing sales to seek higher prices after making faster progress on harvesting than last year.

Farmers have gathered about 75 percent of the crop, or about 1.1 million metric tons, and sold 360,000 tons, according to the medians of seven trader and shipper estimates compiled by Bloomberg. The harvest is set to drop 12 percent to 1.45 million tons from a record 1.65 million tons last season, the survey shows. Robusta traded in London may climb 14 percent to $2,150 a ton by the end of June, a separate survey shows.

Curbs on sales from Vietnam may support prices as global supplies increase. Farmers worldwide will gather 56 million 60- kilogram bags of robusta in the 2012-2013 year, up from 53.3 million bags a year earlier, the International Coffee Organization estimates. Robusta has tumbled 13 percent since the end of September when harvesting began in Vietnam.

“We don’t see any more panic selling like in the past,” Alexander Gruber, chief representative in Vietnam of Tong Teik, a member of RCMA Commodities Asia Group, said at an industry conference last week. “Today farmers sit there and at least every day they have 10 traders or middlemen knocking on their door asking for coffee.”

Farmers have the financial resources to limit sales and are waiting for domestic prices to reach 40,000 dong ($1.92) a kilogram, Luong Van Tu, chairman of Vietnam Coffee & Cocoa Association, said in a Dec. 6 interview in Ho Chi Minh City. Prices are around 38,000 dong to 39,000 dong and sometimes lower, he said. Farmers have been able to borrow at least 50 million dong each without collateral since the start of the year because of government support, he said.

Faster Pace

Harvesting was faster than last year as growers started picking two weeks earlier and the weather was dry, traders said. Dak Lak, the main growing region in Vietnam, had almost no rain and the weather was sunny and “quite” favorable for picking in the first 10 days of December, the Meteorology and Hydrology Department said Dec. 11. The area will have similar weather in the 10 days through Dec. 20, it said.

Four out of five traders and analysts surveyed by Bloomberg said they were bullish on prices, and forecast futures in London would climb to highs ranging from $1,950 a ton to $3,000 a ton by the end of June as farmers in Vietnam curb sales and the world economy recovers. One respondent predicted futures may drop as low as $1,700.

Robusta is harvested mainly in Asia and parts of Africa, while arabica is grown in Latin America. Robusta for delivery in January rose 0.4 percent to $1,895 a ton on NYSE Liffe at 5:06 p.m. Singapore time. Arabica for March fell 0.3 percent $1.49 a pound on ICE Futures U.S. in New York. Robusta’s discount to arabica has shrunk to 63.04 cents from 145 cents at end-2011.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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