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NEWS UPDATES 3 February 2010

Vietnam: Low prices, stocks stunt coffee trade

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A smaller-than-expected harvest and low prices have restricted trade in Vietnamese coffee as farmers hold back supplies about 10 days before Tet, or the Lunar New Year, the country's biggest festival, Reuters quoted traders as saying Tuesday.

Trade usually picks up a month before Tet, which falls this year between Feb. 13-16, because farmers need cash for expenses and fuel to water their trees from February through April at the peak of the dry season.

But this year farmers may have picked a smaller crop as they sell slowly to wait for better prices, traders said.

"My company could not buy anything in the past week," said an exporter based in Buon Ma Thuot, the capital city of Vietnam's top coffee-growing province of Daklak.

Another Vietnamese dealer said it was difficult to buy 100 tonnes a day, even after the harvest ended last month, while daily purchases at the same time last year were 1,000 tonnes.

"Farmers gave different crop loss estimates, but on average the harvest may be 35 percent smaller," he said. His company in the commercial hub of Ho Chi Minh City buys beans from farmers and middlemen and sells to exporters or ships directly for European buyers.

A hectare of coffee brought in 3.5 tonnes this harvest versus 5 tonnes last year, he said, projecting Vietnam's whole crop at 850,000 tonnes, or 14.2 million 60-kg bags, at most.

But foreign traders and market analysts have a different view. Investment bank Fortis has raised its forecast of the 2009/2010 coffee crop by 13.5 percent to 19.4 million bags.

Vietnam has exported an estimated 421,600 tonnes, or 7.03 million bags, between last October and last month, up 10.3 percent from a year ago, government data show.

The shipment represents 39 percent of the latest harvest, based on Reuters poll's median figure of 18 million bags, excluding stocks carried over from the previous 2008/2009 season.

Foreign buyers bid for a discount of $40 a tonne to London's May contract for Vietnamese robusta grade 2, 5 percent black and broken, against discounts of $35-$50 last week, meaning a free-on-board price of $1,315 a tonne now.


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