Vietnam’s Coffee Discount Doubles After Advance in Futures Price

Buyers of coffee from Vietnam, the biggest grower of the robusta variety used in instant drinks, are getting a bigger discount for their beans as futures rallied and domestic prices gained, according to Volcafe Ltd.

Vietnamese beans for shipment in March and April were last week at a discount of $40 a metric ton to the futures traded on NYSE Liffe in London, the coffee unit of commodities trader ED&F Man Holdings Ltd. said in a report e-mailed Feb. 21. That compares with a discount of $20 a ton a week earlier. Robusta futures traded in London jumped 8.3 percent last week.

The rally “brought sellers and farmers out of the wood to book their consigned coffee or liquidate partially their stock,” Winterthur, Switzerland-based Volcafe said. Local prices gained and discounts in the export market rose, it said.

Robusta’s advance last week was the biggest since February 2012. Arabica beans soared 19 percent, the most since August 2001, over the same period as dry weather threatened to cut output in leading producer Brazil. Vietnamese beans were trading in the local market at 37,800 dong ($1.79) a kilogram on Feb. 21, up 6.8 percent from a week earlier, data from the Daklak Trade & Tourism Center on Bloomberg showed.

Farmers in Vietnam sold 35 percent to 40 percent of the 2013-14 crop, down from 53 percent a year earlier, according to Volcafe. Growers are reluctant to sell and deals are only being closed at higher prices, it said. Local prices climbed to a record 51,600 dong a kilogram in 2011.

“Local prices are currently in the middle of a 2 to 3 year range,” Volcafe said. “We continue to expect disciplined selling from producers, stepping back from dips in the market.”

Indonesia’s Premiums

In Indonesia, the third-biggest robusta producer, premiums fell less than anticipated as exporters are selling beans for nearby shipment and holding back on sales for later delivery, according to the report. Indonesian beans for shipment in March and April were last week at a premium of $55 a ton to the exchange price, down from $65 a ton a week earlier.

“Exporters remain reserved about the new crop and adopted a wait and see attitude,” Volcafe said, referring to the 2014-15 crop that will start in Indonesia in about April.

Bean deliveries from farms in Indonesia totaled 2,200 tons to 2,400 tons last week, according to the report. That compares with 1,500 a ton a week earlier. The fly crop, which usually peaks in December or January, is still in progress, Volcafe said. The next main harvest will last longer and have “limited volume.”

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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