Demand for Indonesia Coffee Seen Subdued on Vietnamese Prices

Demand for coffee from Indonesia, the third-biggest producer of the robusta variety, is subdued as lower prices in leading grower Vietnam attract more buyers, according to Volcafe, a unit of trader ED&F Man Holdings Ltd.

While Indonesian beans for shipment in December and January are at a premium of $190 a metric ton to the futures on NYSE Liffe in London, coffee from Vietnam is at a premium of $50 a ton, data from the Winterthur, Switzerland-based trader showed. Vietnam will harvest a record 30 million bags in the 2013-14 season started Oct. 1, the trader estimated on Nov. 29.

There’s “little buying interest as buyers are focusing to buy cheaper from Vietnam,” Volcafe said in a report e-mailed today, commenting on Indonesia. “In the local market, we see only exporters cover shorts. Others are side-lined and stopped buying, they ship only the committed contracts.”

Robusta coffee futures fell 12 percent this year partly as traders anticipated a record crop in Vietnam. Supplies of the variety used in instant coffee and espresso will be 2.2 million 60-kilogram (132 pounds) bags higher than demand in the 2013-14 season that started in October in most countries, Volcafe forecasts.

Bean deliveries from farms in Indonesia were 1,500 tons this week, according to the report. Arrivals are “slightly higher” because of a bigger so-called fly crop, which usually peaks in the December to January period, the trader said. Indonesian output will be 11.2 million bags in 2013-14 compared with 11.7 million bags a year earlier, Volcafe estimates. The season in Indonesia usually starts at about April.

Bean Stockpiles

In Vietnam, coffee exports in October and November were just over 150,000 tons, down from 240,000 tons a year earlier, Volcafe said. Bean stockpiles in Ho Chi Minh City increased during both months and carryover inventories in the hands of farmers were among the highest ever, the trader added.

Lower futures this year meant farmers in the southeast Asian nation held back supplies, slowing shipments and prompting a price rally of 11 percent in November, the biggest monthly gain since 2011. Prices fell in the past two days.

“Good volumes changed hands last two days as London came down and speculators liquidated part of their positions,” Volcafe said. “We are under the impression that if we see lower prices again, we could see more coffee in the market.”