Vietnam set to extend coffee retention scheme

Vietnam set to extend coffee retention scheme

SINGAPORE (Reuters): The world's second largest coffee producer Vietnam is set to extend its retention scheme, though that is unlikely to give much help to the commodity's prices, hovering near 30-year lows, traders said on Thursday.

Vietnamese exporters are waiting for Hanoi to approve their decision last week to extend by three months the government- funded retention scheme for 60,000 tons. The scheme is set to expire in mid-May.

As part of global efforts to rescue international coffee prices, Vietnam decided in November to hold back 60,000 tons of exportable coffee for six months. In February, it decided to retain an additional 90,000 tons for six months.

But traders in the region were not worried about supply from Vietnam as there was probably as much as 275,000 tons left in the country, including 200,000 tons uncommitted.

A small rally in London on Wednesday from a new 30-year low on Tuesday ignited hopes for a price recovery among suppliers, to further slow down the flow of coffee, they said.

Yet they saw the benchmark grade two, five percent black and broken, still traded as cheap as $395-$400 per ton, FOB, for April/May. Differentials were seen at $170 below London.

"Farmers are selling everyday, but only a small amount. All the middlemen and rich farmers are holding coffee and waiting for the prices to go up," said a trader in Vietnam.

In Indonesia, where the harvest is to peak in May or June , the flows of coffee have also been slow as the rupiah's renewed decline raised hopes it would partly offset a sharp fall in dollar-denominated international coffee prices.

On Thursday, the rupiah slipped through the 11,000 per dollar level for the first time in five weeks in the face of heavy corporate demand for dollars.

"It's different from the usual season," said a trader based in Lampung in Sumatra. "It's been very, very slow."

The trader said most farmers were selling only stocks from the previous season, which he estimated stood at about 50,000 tons altogether.

Indonesia's crop for the new year, which began in April, might also drop as much as 25 to 30 percent from the previous year as many farmers were not interested in coffee, he added.

Many traders estimated Indonesian 1999/2000 crop at around 410,000 tons.

Traders said Indonesian exporters were offering the benchmark grade four, 80 defects robusta beans at $130/$140 per ton below London futures, while buyers were unwilling to pay more than the prices paid for Vietnamese coffee.