Vietnamese farmers hold onto coffee stocks amid low prices

By Phuong Nguyen and Mas Alina Arifin

HANOI/BANDAR LAMPUNG, Indonesia (Reuters) - Traders and exporters in Vietnam have taken a step back from purchasing low-priced coffee beans from local farmers, while inventories begin to decline.

"There are very few export quotations as it's been difficult to buy on domestic markets," a trader based in the coffee belt of Vietnam said.

Farmers in the Central Highlands, Vietnam's largest coffee-growing area, sold coffee at 30,500-31,000 dong ($1.31-$1.33) per kg, narrowing from the range of 30,800-31,000 dong last week.

"Farmers are complaining prices are exceptionally low," the trader said. "They are asking for at least 33,000 dong per kg, equivalent to the production cost."

Due to recent lack of rainfall, traders said the 2019/20 crop would likely face drought, which could lead to a dip in the production. Moreover, abundant supply of robusta beans from Brazil would also drag Vietnam's prices lower.

May robusta coffee settled down $12, or 0.9%, at $1,287 per tonne on Wednesday.

Traders in Vietnam offered 5% black and broken grade 2 robusta at $140 premium per tonne to the May contract on Thursday, widening from last week's $130 premium.

Vietnam exported 145,101 tonnes, or 2.4 million 60-kg bags, of coffee in January, down 22.9% from December last year, customs data showed on Wednesday.

Meanwhile, Indonesia's Sumatran robusta were offered with $350-$370 premium to May contract, two traders in Lampung Province on Sumatra island said. That compared with $250-$350 premium last week.

"Trade is getting more unstable and growing increasingly quiet. This may continue until April," one of the traders said.

Premium would continue to increase due to lack of new supply, another trader said.

Main robusta harvest in Sumatra typically falls near the middle of the year, but some areas often have mini harvests a few months earlier.

($1 = 23,239 dong)

(Reporting by Phuong Nguyen in Hanoi and Mas Alina Arifin in Bandar Lampung)