Vietnamese coffee farmers have slowed or halted sales in recent days, waiting for exporters to execute a government-backed stockpiling plan despite some gains in international prices, traders said on Tuesday.
Last Friday Vietnam finalised a plan to stockpile 200,000 tonnes of coffee for six months, with purchasing at a price of 25 million dong ($1,316) per tonne to start on April 15, a major exporter said.
The government was expected to sign a directive this week and banks would give soft loans to exporters to help them buy beans, exporters said.
"Farmers are selling slowly, awaiting better prices," said an exporter in Daklak, Vietnam's top coffee growing province, where robusta beans edged up to 24.5-24.7 million dong ($1,289-$1,300) a tonne on Tuesday after news of the stockpiling plan.
Before news of the plan emerged, the beans stood at 24.4 million dong last Friday.
Discounts to London July robusta LRCc2, which ended up $12 at $1,388 per tonne on Monday, stood at $20-$30 a tonne, putting Vietnamese robusta beans grade 2, 5 percent black and broken at around $1,360 a tonne on a free-on-board basis.
But traders said exporters were reluctant to sign deals with forward shipments, after many companies faced losses due to price falls in London earlier this year. Futures contracts fell to an eight-month low in late February before recovering last month.
SUPPLY PRESSURE COOLED
Exporters have been hoping for a price rise, citing reduced supply as the stockpile will take off the table half of the 400,000 tonnes of coffee now left in Vietnam, while traders at foreign firms remain sceptical over the real impact.
"Indonesia is nearing its harvest now and Brazil will start in June and July, so the pressure on supply will ease," a trader in Ho Chi Minh City said.
The main harvest in southern Sumatra, Indonesia's key coffee-producing area, normally takes place in March but will be delayed to late April or early May due to wet weather.
"With supplies coming, the Vietnamese plan could be badly positioned," the trader said.
On the production front, state weather reports forecast the Central Highlands coffee belt would face water shortages in the coming weeks, with water levels in regional rivers now falling slowly.
A Daklak coffee grower said his drilled wells were exhausted after four tree watering sessions so far during the current dry season. A lack of water results in smaller cherries and thus affects the quality of exportable beans.
In Daklak, 2,500 hectares (6,180 acres) of coffee, along with some rice fields, were hit by water shortages and the area could be ruined, a provincial report on agricultural production said.
But the affected area is tiny compared with the province's total coffee plantation of 184,500 hectares. The rainy season is expected to come to the region in early May, as usual.
CoffeeNetwork has also forecast Vietnamese 2010/2011 production to be similar to an estimated 19.5 million bags in 2009/10.
Source: Reuters