Asian coffee trade shifts focus to Vietnam

Asian coffee trade shifts focus to Vietnam

SINGAPORE (Reuters): The Asian coffee trade has shifted its focus to what is expected to be a record coffee crop in Vietnam as supplies from drought-stricken Indonesia tails off, dealers said yesterday.

"Coffee is beginning to come in from Vietnam," a European dealer said. "Weather conditions are close to ideal in Dak Lak." The province of Dak Lak in Vietnam harvests around two-thirds of the coffee produced in the country.

Traders said the Vietnam coffee harvest, which will reach full spate in late November, should reach a record 360,000-380,000 tonnes against total output of around 330,000 tonnes in the November/February 1996/97 season.

"Vietnam can hit 380,000," one dealer said.

Dry conditions in the country were even a bonus for farmers who are now busy drying their beans for sale.

"Continuous rains last year made it difficult for some farmers to dry out their beans and moisture problems became a source of concern. We don't have that this year," a trader said. "The weather has been superb."

Almost all of the coffee Vietnam sells are robusta beans, which are more bitter in taste and are used extensively in the instant coffee industry.

There have been some small deals of up to 60 tons done recently from Vietnam's benchmark Grade 2 coffee, 8 percent black and broken, for around US$250-$300 under the basis January robusta contract in London.

"We saw some small deals for two, three boxes of Vietnamese coffee, but business has been a bit slow," a dealer said. "It's quiet. It's not as active as it had been earlier," a European trader said.

Coffee supplies from Indonesia, which has been badly hit by a drought triggered by the El Nino weather anomaly, have shrunk.

"There's not much coffee coming from Indonesia. Supplies have tailed off from that origin," a dealer said.

Scattered rains fell on parts of Indonesia's coffee belt, the dealers said.

"There were some scattered rains in Indonesia, but it is not enough. It's still dry in most parts there," one trader said. "There's still no sign of any heavy rains in Indonesia. The cherries are shriveling down there," another said. "Even if you get some rain for a day or two, the situation is aggravated when the drought hits the trees again afterwards."

The coffee belt of Bengkulu, Lampung and South Sumatra have been particularly hit hard by the drought.

Dealers estimate Indonesia's 1998 coffee harvest will probably reach 300,000-320,000 tonnes against a normal crop of 450,000 tonnes.

The London robusta market is expected to open unchanged to slightly lower later on Wednesday.

"It should be unchanged to a few dollars lower," one said. Another said London should be "due slightly lower because New York fell last night after London closed".