Vietnam's coffee prices leap-frog London, trade dull

By Ho Binh Minh   April 28, 2017 | 01:49 am PT
The premiums quoted this week mark the first time since September 2016 Vietnamese beans have stood above London futures prices.

Vietnamese coffee exporters switched their quotations of the commodity to premiums compared to ICE futures prices this week, the first time since last September, due to thin domestic stocks and a fast decline of futures prices, traders said on Friday.

Premiums for Vietnamese grade 2 robusta beans, 5 percent black and broken stood in a wide range from $45 to $60 a ton compared to ICE July contract. Last week they stood at $25-$35 a ton below London.

Exporters in the world's largest robusta producer and exporter last quoted the beans at premiums to London on September 1, 2016, seeking to sell grade 2 beans at $5-$10 a ton above.

"Both sides are quiet, while the volume of stocks in farmers' hands is very low," a Vietnamese trader at a European firm in Ho Chi Minh City said. Farmers often hold back sales when prices decline.

"The quality of beans in stock is also very bad as farmers sold their good-quality beans a long time ago, right at the start of the new crop year," he said. 

Rain hit Vietnam's coffee crop at the start of the harvest in October-November last year, resulting in more black and broken beans, traders said. 

With exporters unable to buy large quantities from farmers for loading, they have to maintain relatively stable buying prices, while the ICE futures prices have dropped faster, leaving Vietnamese coffee prices above the London levels, traders said.

ICE July robusta contract ended down 1 percent at $1,910 per ton on Thursday, having lost 12 percent in the past two weeks due mostly to funds liquidating long positions, while domestic prices in Vietnam shed only 10 percent, hitting VND41,800-42,200 dong ($1.84-$1.86) per kilogram on Friday.

On Wednesday, domestic prices fell to as low as VND41,600 per kg, the lowest since December 12, 2016.

Robusta stocks kept in Vietnam by export firms and several foreign trading firms still look good, traders said.

Unlike in the past when Vietnamese coffee prices closely followed London futures movements, pricing in Vietnam is now more independent, especially when the world is expected to face a deficit this year and Vietnam still has stocks, another trader in Ho Chi Minh City said.

World coffee output is projected to edge up 0.1 percent to 151.62 million bags in the crop year commencing 2016, while consumption is estimated at 155.1 million bags, leaving a deficit of at least 3.48 million bags, the London-based International Coffee Organization said in its March report.

A faster-than-usual export flow from Vietnam so far this year has given roasters good stock cover, traders said. 

Last month, Vietnam exported 168,000 tons, or 2.8 million bags, of coffee, beating the world's biggest producer Brazil to become the world's largest exporter of the commodity for the second time in a year, based on industry reports. Brazil shipped 2.71 million bags in March.

The March shipment brought Vietnam's total coffee exports to 834,100 tons for the first half of the 2016/2017 crop year ending last month, up 2 percent from a year ago and the highest volume in three crop years, based on Vietnam Customs data.

go to top