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Asia Coffee-Increased supply cuts premiums, roasters seek bargains
February 28, 2013 / 6:01 AM / 5 years ago

Asia Coffee-Increased supply cuts premiums, roasters seek bargains

* Sumatran beans on par with London for March/April

* Vietnam robustas fetch smaller discounts at $10/T

* Sumatran beans for May/June at discounts

By Lewa Pardomuan

SINGAPORE, Feb 28 (Reuters) - Indonesian robustas fetched smaller premiums this week as more beans were expected to arrive from plantations, while worries about dry weather pushed up the price of Vietnamese coffee, dealers said on Thursday.

But No.2 robusta producer Indonesia could also see a pick up in demand from foreign roasters in the coming weeks, with the beans likely to trade at discounts to London futures as the main harvest gains pace.

Sumatran grade 4, 80 defect coffee for March-April shipment was on par with London’s May contract, versus premiums of $20 to $50 last week. Robustas in top producer Vietnam were at discounts to futures.

“People may switch from Vietnam to Indonesia when you see more beans in June,” said a dealer in Singapore. “But I think international roasters will have to compete with local players like Kapal Api or Mayora.”

Local roasters and processed food producers such as PT Mayora Indah are active buyers of Sumatran beans, with domestic consumption forecast to grow 7.6 percent to 2.54 million bags in the 2012/2013 crop year.

Harvesting in Indonesia’s main growing island of Sumatra normally starts in March or April, but good weather has brought that forward this year. Heavy rain damaged the crop in the 2011/12 season, causing a severe supply shortage that sent premiums to all time highs at $550.

Weekly arrivals were steady at between 900 and 1,200 tonnes in Sumatra.

In Vietnam, grade 2, 5 percent black and broken beans stood at discounts of $10 to the May contract, smaller than $20 last week and $50 earlier this month.

Prices in the domestic markets rose this week to their highest in four months on a slow return from the long Tet Lunar New Year break and as farmers held back from the market in anticipation of higher prices later in the year.

“I think the price in Vietnam will get firmer and firmer. Farmers had sold whatever they needed to sell before Tet, but now they will only release stocks slowly, and whenever the price is good,” said the dealer in Singapore.

“People are buying Vietnamese beans at minus $10, but it’s only hand-to-mouth.”

Vietnam’s 2012/2013 coffee crop is estimated to fall about a quarter from a record previous harvest to 18.75 million 60-kg bags (1.1 million tonnes), and the next season could be hit by drought, according to the chairman of the Vietnam Coffee and Cocoa Association.

WEEK AHEAD, RISING SHIPPING COSTS

Vietnamese robustas could trade at smaller discounts next week if roasters rush to buy the beans on concerns over the possible drought. In Indonesia, some exporters are worried about a possible increase in freight rates for cargoes to Europe.

“Some shipping lines are going to impose a general rate rise. The increase is pretty high from $250 per 20-foot unit to $400 to $600,” said a dealer in Sumatra.

Editing by Joseph Radford

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