Asia coffee: Vietnam prices fall as drought continues; supplies build up in Indonesia

[SINGAPORE] Vietnam coffee prices fell this week amid weakness in global robusta, as local farmers continued to face water shortage, while Indonesia witnessed supply build up and muted trade.

Drought has hit 300 hectares of crops, mostly coffee trees, in Dak Lak province in the Central Highlands, Vietnam's largest coffee growing area, local officials said.

"The situation of drought is forecast to get worse towards the end of March and early April," Mai Trong Dung, head of the province's agriculture department, told local media.

Farmers in the Central Highlands sold coffee at 31,900-33,700 dong (S$1.86-$1.96) per kg on Friday, down from a range of 33,700-34,000 dong last week.

Traders in Vietnam are complaining they are making losses on fixed contracts as prices have been falling over the past week, and they are also having a hard time securing the beans as farmers refrain from selling due to low domestic prices.

Traders in Vietnam offered 5 per cent black and broken grade 2 robusta at a US$50 per tonne discount to the May contract, compared with US$50-$70 last week.

Meanwhile in Indonesia, supplies have started to build up amid a mini harvest but demand remained muted this week.

"Demand is a bit muted but supply has started to come in, but its not much yet," a trader said, adding that local buyers remained dominant this week.

Indonesia's main robusta coffee harvest usually falls around mid year in southern Sumatra.

Indonesia's premium for the grade 4 defect 80 robusta was steady on last week at US$70-$80 to the May contract on Thursday, a trader in Lampung said.

Other traders in the province said premiums were US$169-$170.

Meanwhile, May robusta coffee settled down US$28, or 1.8 per cent, at US$1,490 per tonne.

REUTERS