Asia Coffee-Roasters Chase Sumatran Beans; Vietnam Offers Limited
Singapore. More roasters are chasing Indonesian robustas for nearby shipments before the start of the Ramadan fasting month, keeping prices at high premiums to London futures despite the steady arrival of beans from plantations, dealers said on Thursday.
Indonesia, the world’s second-largest robusta producer after Vietnam, is also the world’s most populous Muslim nation. Many roasters are in the market to buy beans before cherry picking slows down during Ramadan, which is due to start later in July.
Sumatran grade 4, 80 defect beans were traded this week at premiums of between $20 and $50 to London’s September contract, up from between $10 and $30 quoted two weeks ago.
Vietnamese robustas were also at premiums to London futures, heightening competition between the two producers.
“Sumatran robusta premiums are still very high. People are buying. But prices should come down towards the end of July when more beans from the midlands and highlands arrive,” a dealer in Singapore said.
“But right now, a lot of suppliers are trying to cover their shorts. I think they are over committed,” said the dealer, adding that daily arrivals in Sumatra were steady at 1,200 tons.
The harvest in Sumatra started at the end of January and is likely to peak soon, while the next crop in Vietnam is expected to start in October or November in the Central Highlands coffee belt.
Vietnam and Indonesia together account for about a fifth of the global coffee output in the 2011/2012 crop, according to the International Coffee Organization.
Robusta coffee on Liffe edged higher on Wednesday, with September gaining $8 to close at $2,021 per ton.
Arabica futures 0 KC:, which often set the tone for robusta prices, jumped on fears that Brazil’s coffee region could be hit by chilly temperatures at the end of the week.
Vietnam’s grade 2, 5 percent black and broken was quoted at premiums of between $20 and $40 a tonne to the September contract, hardly changed from two weeks ago. Deals were reported at $20 and $25 premiums.
Vietnamese beans are normally sold at discounts because of the size of the crop and occasional delays in shipments, but tight supply ahead of the new harvest prompted sellers to offer robustas at prices above the London market.
“For Vietnam’s beans, most people are asking to sell at $40 premiums, but bids are at London levels. So I guess if anything is done, it may be at $20,” another dealer in Singapore said.
“There’s very little going on in Vietnam. The flow of coffee in Indonesia would have been much higher, but the arrivals are still quite good. If Liffe gets back up to $2,050 and above, then maybe premiums will be around zero.”
Vietnam’s better-quality grade 1, screen 16 beans, which are the equivalent of Sumatran robustas, fetched premiums of $70 a tonne to London futures, down slightly from $90 premiums two weeks ago because of recent gains in London. Premiums and futures often move in opposite direction.
Vietnam’s actual coffee export loadings in June fell 30.8 percent from May to 140,900 tons, or 2.35 million 60-kg bags, Vietnam Customs said on Thursday, above market expectations.
Vietnam’s upcoming 2012/2013 crop could produce a record 23.7 million 60-kg bags, up from 22.7 million bags in the current crop that ends in September, analyst F.O. Licht said.
Robusta beans are likely to stay at premiums next week on a combination of tight supply in Vietnam and short covering by roasters.
“We do think there’s a chance for the 80 defect beans to be quoted at zero premiums, but I don’t think it will happen so soon. It will depend on how the supply is coming in,” said the first dealer in Singapore. “You know that demand from the domestic market is also strong in Indonesia.”