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.