HANOI, March 10 – Vietnam's coffee premiums held steady, with farmers slowing sales on concerns over dry weather affecting output, while domestic buying and thin stocks in Indonesia helped to raise outright prices, traders said on Thursday.
The dry season in Vietnam, the world's top robusta producer, is peaking, with water shortages forecast to cut 2016/2017 output. Rival producer Indonesia has low stocks, which has helped to push up export price quotations to a 15-month high.
"Most activities are focused on domestic markets, where exporters in short position have to raise their buying prices to secure beans," said a trader in Ho Chi Minh City.
Domestic prices in Daklak, Vietnam's biggest growing province, advanced to 31.1 million-31.4 million dong ($1,400) per tonne, tracking gains in the ICE robusta futures.
At 31.4 million dong, the price is on par with that on Feb. 6, according to data on Reuters.
Premiums of Vietnamese robusta grade 2, 5 percent black and broken were stable at $50-$70 a tonne to the May ICE contract in the past week. Beans grade 1, similar to Indonesia's Sumatran coffee, were steady at premiums of $95-$110 a tonne.
ICE May robusta coffee settled up 0.9 percent at $1,420 per tonne on Wednesday.
As dry weather intensifies in Vietnam's Central Highlands coffee belt, underground water might sustain trees only until the end of this month, traders said.
The current El Nino weather event is likely to delay the usual arrival of the rainy season by 10-15 days.
The government has announced financial aid worth $23.5 million to help 34 provinces fight drought and salination, it said in a statement on Wednesday.
About 40 of Vietnam's 63 provinces have now been affected by the dry weather.
In Indonesia, premiums rose to $300-$320 a tonne for beans grade 4, 80 defects COFID-G4-USD to the ICE May contract, from a premiums of $300 last Thursday, due to thin stocks, traders said.
At $320 a tonne, the premium is the highest since at least December 2014, according to data available on Reuters.
"Prices were good and went up because there was support from Java factories, while there were little stocks," a Lampung-based trader said, adding that purchases by small traders also supported prices.
Indonesia's main harvest will pick up from late this month.
Indonesia's coffee bean production is targeted to increase by up to 27 percent to 700,000 tonnes in 2016, a manager at the country's coffee association said on Thursday, up from 550,000 tonnes in 2015.