Coffee farmers in Vietnam, the biggest producer of robusta beans used by Nestle SA in instant drinks, are limiting sales from a record harvest before the Tet Lunar New Year festival as they expect higher prices.
Growers will sell 33 percent of their beans before the holiday starts on Jan. 28 compared with an average 43 percent in the past five years, according to the median of 12 trader and analyst estimates compiled by Bloomberg. Farmers have sold 25 percent of this year’s 1.7 million-metric ton crop as of now from 33 percent a year ago, the survey showed. Growers usually accelerate sales to raise cash before the Tet holiday.
Robusta futures traded in London entered a bull market last month, rebounding from a three-year low, on the slow pace of sales from Vietnam and a decline in stockpiles tracked by NYSE Liffe to the lowest since at least 2002. By contrast, inventories on Vietnam’s farms have probably climbed to a record, says Anh Minh Co., the country’s top private shipper.
“Thanks to good coffee prices during recent years and access to cheap finance, farmers have no pressure to sell and can wait for the market to reach their target levels,” said Alexander Gruber, trading manager at Tong Teik Pte, a company owned by RCMA Commodities Asia Pte, referring to domestic prices that increased in three of the past four years.
Beans in Dak Lak province, which supplies about 30 percent of the country’s crop, traded at 34,800 dong a kilogram today, data from the Trade & Tourism Center show. While prices increased 18 percent from a three-year low in November, they’ve slumped 24 percent from the 45,500 dong peak reached in March, which was the highest level in almost 18 months.
“Prices are not good and are worse than the time before Tet last year, so I haven’t sold much,” said Huynh Van Phuoc, a 46-year-old farmer, who has four hectares in Dak Lak. “I’ll wait until after the holiday for prices to get better.”
Rising stockpiles at farms in Vietnam will probably limit a price rally after Tet, said Phan Hung Anh, deputy director of Dak Lak-based Anh Minh, the largest private coffee-exporting company by shipping volume.
“The amount unsold among farmers in Vietnam of about 1.2 million tons to 1.3 million tons now is probably a record level for this time of year,” said Anh. “After Tet, farmers will sell more if prices go up and of course that flow of supply will put downward pressure on prices.”
Inventories in Vietnam will reach 3.82 million bags (229,200 tons) at the end of the year that started Oct. 1 from 1.97 million bags in 2012-2013, the U.S. Department of Agriculture’s Foreign Agricultural Service said in a report on Dec. 13. The country will ship 24.5 million bags from a record crop of 28.5 million bags, it said. A bag of coffee weighs 132 pounds or 60 kilograms.
Robusta advanced 24 percent to close at $1,799 a ton on Dec. 13 from a 29-month low of $1,447 on Nov. 14, meeting the common definition of a bull market which is an increase of 20 percent or more. Futures gained 2.1 percent to $1,718 this year, after a 13 percent drop in 2013.
Vietnam exported 1.29 million tons last year, 26 percent less than in 2012, the General Statistics Office estimates. Stockpiles monitored by NYSE Liffe were 28,200 tons on Jan. 6, according to exchange data.
“Vietnamese movement, while picking up, is still slower than what is typically seen,” said Sterling Smith, a futures specialist at Citigroup Inc. “We do expect demand to improve as nervousness mounts over the Brazilian crop.”
Global arabica and robusta supplies will probably trail usage by about 5 million bags in 2014-2015, Volcafe Ltd., the Winterthur, Switzerland-based coffee-trading unit of ED&F Man Holdings Ltd., said in a report e-mailed on Jan. 6.
Brazil’s arabica production will be 35 million bags and robusta 16 million bags, Volcafe said. That compares with 40.7 million bags and 16.5 million bags a year earlier, data from the trader released in November showed. The country is the world’s biggest grower of arabica beans, favored by Starbucks Corp., and ranks as the second-biggest supplier of robusta.
Arabica futures jumped 17 percent to $1.19 a pound in New York from a seven-year low in November. That boosted the premium arabica commands over robusta to 40.76 cents a pound from a five-year low of 27.95 cents in December.