Vietnam coffee shines on tight Indonesian supply

Vietnam coffee shines on tight Indonesian supply

SINGAPORE (Reuters): The dry spell haunting Indonesia's coffee belt gave way to intermittent rains recently but supplies remained tight, giving Vietnam's coffee prices a boost, dealers said on Wednesday.

"Vietnam's supply is in full swing. The take-up rate is very good as traders seek to compensate for the sharp fall in Indonesian supply," a coffee dealer in Singapore said.

He said Vietnam's production will hit an all-time high of 350,000-400,000 tons in the November/February 1997/98 season.

Another dealer said keen buying interest for Vietnamese beans was also seen from Indonesian coffee exporters who were looking to cover their supply short-fall.

Deals for Vietnam's key grade 2 coffee, 8.0 percent black and broken, were seen at US$250-$300 under London's benchmark January robusta futures contract, which ended on Tuesday $20 up at $1,602 per ton.

"The Indonesian exporters are buying excessively. I believe some could be for genuine roasting purposes but some are not," said another dealer in Singapore.

Indonesia, Asia's largest coffee producer, got much needed rains over the last two weeks just as the ground in their coffee regions began cracking from the dry spell brought by the El Nio weather pattern.

Supplies, though, remained tight.

"The weather condition has improved. The rain is good as it stopped further crop damage," said the dealer in Singapore.

However, dealers said it was premature to determine the impact of the rains on the coffee trees.

Dealers estimated Indonesia's coffee harvest for next year would fall sharply to around 300,000 to 360,000 tons against a normal season's output of about 450,000 tons after drought spawned by El Nio blighted the crop.

Indonesian coffee prices remained firm, estimated by the trade at around $1,550 a ton FOB Lampung, or anywhere between $30-$50 under the January contract price, dealers said.

Dealers said despite the bullish demand for Vietnam supplies, the upside will be limited.

"Prices are likely to stay firm till end March but the upside is going to be limited because these are the levels reasonable enough for Indonesian exporters to buy," a dealer said.

Dealers expected the London robusta futures to open slightly lower later on Wednesday.