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Singapore. Dry weather in Indonesia’s main coffee growing island of Sumatra raised concerns about the prospect of the next crop, while roasters wanted to buy Vietnamese beans at the cheapest possible price due to a bumper crop, dealers said on Thursday.

But the chairman of Vietnam Coffee and Cocoa Association (Vicofa) told Reuters the country has no stocks to carry forward to the next 2011/2012 season and plans to ask members to stockpile up to 300,000 tonnes, which traders viewed as a move to keep prices from slumping and create artificial tightness.

New robusta crop from top producer Vietnam was being offered at a discount to London futures, while beans from second-largest producer Indonesia fetched a hefty premium.  

Indonesia’s next crop was due to start in December or January and coffee trees in Sumatra were now in the flowering stage. The previous harvest earlier this year was hit by heavy rains, which badly damaged coffee beans.

“If we don’t see rains at year-end, then I think it will be a mess. It looks like there’s going to be a prolonged drought,” said a dealer in Bandar Lampung, the provincial capital of Lampung in Sumatra. “It all depends on the weather. I mean even if it did rain in December, it’s still going to be a mess if it didn’t stop raining either.”   

Indonesia’s coffee exports could fall about a third to 300,000 tonnes in 2011, as supply constraints will lead to tight stocks at the end of the year, the Indonesian Coffee Exporters Association (AEKI) said. 

Robusta coffee bean exports from Sumatra fell 40 percent in July from the same month a year ago, as stocks run down after heavy rains hit output, government trade data showed. 

“Flowering is fine so far but we do need rains in following months. The flowers will be fried if we don’t see rains,” said another dealer in Bandar Lampung. “The main worry now is that flowers will fail to turn to cherries.”

Indonesia’s state weather agency has forecast the country’s dry season will last longer than normal until November.

Supply scarcity sent premiums for Indonesian robusta to all-time highs at $550 a tonne above London futures 0 LRC: in early August before slipping in September, as consumers turn their attention to top robusta producer Vietnam.

Premiums for Indonesian robusta beans fell more than 20 percent from a lifetime high of $450 above London’s November contract quoted last week on slackening demand and the arrival of Vietnamese new crop. 

Sumatran Grade 4, 80 defect beans were offered at $350 above London’s November futures, although some dealers in Indonesia’s main island of Java still refused to sell the beans at below $450 due to strong demand from roasters there. 

Vietnam’s new crop Grade 2, 5 percent broken beans were offered at discounts as wide as $100 to London’s January contract from $90 last week as an early harvest started in several provinces outside the Central Highlands coffee belt. 

A Reuters poll in July showed Vietnam could see its biggest harvest ever with a median estimate of 21 million bags, up from 18.5 million bags in 2010/11, and well above the 19.3 million bags of 2006/07, its previous record, ICO data show.
 
“I think if you want to buy beans in huge quantity, you can get discounts of $100. It’s quite true about that. There seems to be a psychological level of $100,” said a dealer in Hong Kong.

Week ahead

Dealers will closely watch the weather in Sumatra, while roasters will be extra careful before striking new deals with the Vietnamese following unresolved cases of delays and defaults in the 2010/11 crop year.

Up to 100,000 tonnes of robusta coffee bean shipments from Vietnam have been delayed or defaulted in the season ending September, and traders urged Hanoi to take action to prevent such problems from recurring. 

Vicofa has no comments on this issue.          

Reuters