EXPORTERS CRY FOR HELP AS LOCAL COFFEE PRICE SOARS

HCM CITY — The domestic prices of robusta coffee beans have been higher than the closing price at the London terminal market, causing huge losses to local exporters who are suffering a shortage of coffee.

Last Thursday and Friday, in interviews on Viet Nam Television’s VTV1 Channel, local traders blamed international speculators for their losses and asked the government for help.

Phan Hung Anh, director of the Dak Lak-based Anh Minh Co Ltd, said: “Due to insufficient capital and tight credit, some local traders found it difficult to buy enough coffee for their forward contracts (that they had signed several months ago].”

“To fulfill their commitments, they had to buy coffee beans from international importers at much higher prices [than the price quoted when these forward contracts were signed}.”

Nguyen Minh Ban, director of the farm produce exporter Minh Huy Co in Southern Dong Nai Province, said: “There is not much coffee in stock at the moment. Any local exporter who needs to ship their coffee for forwards contracts must purchase goods stored in international importers’ warehouses.”

As of last Friday afternoon, the price of raw materials of robusta coffee in the coffee-producing provinces of the Central Highlands fluctuated from VND48,500 to VND49,000 per kilo.

These levels are lower compared with those of a few months ago when the domestic price of coffee jumped to around VND52,000 per kg.

The current crop started in October 2010 and would ends on September 30.

The price of robusta coffee in the domestic and international markets has increased dramatically.

By the end of last year, European coffee stock went down from 17 million bags (60 kilos each) to a low of under 11 million bags.

That helped to kick the price even higher on the London International Financial Futures and Options Exchange (LIFFE) for robusta coffee and in the local market as well.

Taking advantage of lower prices at the beginning of the crop, international traders in coordination with speculative funds pumped large amounts of money into the local market to collect a huge volume of coffee beans, which was stored in their bonded and inland warehouses.

In previous years, during the peak period of the crop, starting from December through March of the following year, the price of the local sales and exports very often experienced selling pressure from coffee farmers and exporters, which cut the coffee price.

From mid-2010, many local exporters and intermediaries believed that the level of US$2,000 on robusta LIFFE would be high enough to sell.

In December, they decided to commit a big volume in forward contracts for shipments in July and August this year.

The buying power in the market made LIFFE jump to higher and higher levels, even at a certain point beyond $2,600 per tonne.

As a result, the local price increased day by day. Taking advantage of the opportunities, farmers sold more beans in a well-organised way.

All this made the stocks in the Highlands dry up at the end, which now stands at about 100,000 tonnes.

According to Pham Quang, a Dak Lak Province-based market information service provider, Viet Nam can produce 1.2 million tonnes of coffee for the 2010-11 crop.

Under such conditions, local speculators do not want to sell until their expectation of VND55,000 per kilo can be attained.

In addition to tighter credit and sky-high interest rates (24-26 per cent per annum), local exporters have had to incur losses of $200-300 per tonne to purchase enough beans from international importers in Viet Nam so they can meet their contractual commitments that were made to foreign buyers.

Nguyen Quang Binh, a coffee trading adviser in HCM City, said that local sellers have been forced to buy more beans from international buyers in Viet Nam, but the prices had gone up considerably.

He said that there have been some contracts in which the final price of Vietnamese robusta grade 2 (5 per cent black and broken) could easily reach $2,550-2,500 per tonne, thanks to favourable fixation on the London terminal market by sellers.

“These high prices have kept coffee prices in the local market high,” said Binh.

The latest report from robusta LIFFE futures market up to the end of June showed that the certified stock of robusta coffee reached a record 41,742 lots of 10 tonnes each, equivalent to roughly 7 million bags, almost double a year ago.

Experts believe that beans from Viet Nam could make up 60-70 per cent of the volume, equivalent to 270,000 tonnes. According to Bloomberg news service, the majority of those stocks are owned by one speculative fund. — VNS

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