Hanoi, Sept 1 - Dwindling coffee stocks in Vietnam ahead of a harvest due to start in six weeks, coupled with a lack of clear market direction, have prompted buyers to wait while exporters were reluctant to sell this week, traders said.
Vietnamese farmers are due to start harvesting in the second half of October as usual and coffee cherry picking will peak from November, traders said.
Vietnam is the world's second-largest producer after Brazil.
"Exporters have slowed sales in advance of new crop beans to avoid price uncertainty," a trader in Ho Chi Minh City said, adding that just a few thousands tonnes of the 2009/2010 season coffee had been sold in the past week.
Vietnam had sold around 100,000 tonnes of the next crop's beans, he estimated last month. The country's coffee crop year runs between October and September.
Vietnam's coffee prices rose to a record $2,660 a tonne in early March, 2008, tracking gains in London's May contract of $2,813 a tonne on March 3, 2008, the highest level for the second month since July 1995. Prices in Vietnam have halved since.
Exporters who traded under futures contracts with delivery in the second quarter of 2008 had to roll over several times, waiting for a better London price to fix their contracts.
But as London futures prices headed south, exporters had to pay a mounting fee which led them into losses, traders said.
The Vietnam Coffee and Cocoa Association, the industry body, said in early July that exporters should avoid signing new contracts for the next 2009/2010 crop due to current low prices and production uncertainties.
DIMINISHING STOCKS
Farmers have now run out of coffee stocks while most of the current coffee left from the previous harvest that ended in January were held by buying agents or in warehouses of some foreign trading houses, an exporter in Daklak province said.
Some buyers were seeking Vietnamese beans from the new crop at discounts of $100-$110 a tonne to London contracts for delivery from November onwards, but only several small deals had been reached, traders said.
Discounts to November contract stood at $50-$60 a tonne for outright shipment, from $70-$80 last week, placing Vietnamese robusta grade 2, 5 percent black and broken at $1,350-$1,360 a tonne, free-on-board basis.
"Buyers now are only those who really need to cover their short positions," a second trader in Ho Chi Minh City said.
He said buyers preferred to wait for the new crop to arrive when ample supply will help ease trading.
The current stocks could be at around 2 million 60-kg bags, slightly above the average 1.7 million bags in Vietnam's monthly shipment since last October.
The stock is based on the export of 18.24 million bags from October 2008 to August 2009, from a crop of 19.5 million bags, plus 1.8 million bags in stocks from the previous year. Domestic consumption is stable at 1 million bags.
Exports in the calendar year of 2009 could rise 15 percent to 19.2 million bags, an industry report said.
For the next crop, the coffee association has forecast an output fall of 15-20 percent, while traders in Vietnam said the crop could shrink only up to 8 percent, with one estimating the size at 18.33 million bags.