Robusta export market frozen

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The fall came in line with the lower price at the close of London's Robusta futures market on the last trading day last week.

London's futures market for robusta coffee rose sharply early last week following rumours about frost in the southern part of Brazil, the biggest coffee producer in the world.

The forecasts later downgraded the intensity of the chilly weather there and led coffee prices to lose $26 on futures markets of London for robusta on July 1, but up $153 per tonne for the week.

"The current coffee price in the local market, equivalent to $2,462 per tonne, does not encourage exports. It's too far from the level that can match the bids of foreign buyers," said Tran Quang Sang, a coffee exporter from Ho Chi Minh City.

The FOB (free on board) price of Vietnamese robusta coffee Grade 2, with 5 per cent black and broken, was quoted at minus $50-$40 per tonne, discounted to the level of the trading month of the futures market, or about $2,420 per tonne compared with the closing price of London's terminal market.

On July 1, it was $2,472 basis for September 2011. In London terminal market, robusta coffee is traded for deliveries for six months, in January, March, May, July, September and November. Beginning July 1, September 2011 became the main trading month for coffee forward contracts.

The local market was very high due to narrow inventory of about 100,000 tonnes.

"Though frost intensity in Brazil has been downgraded by weather forecasters, the high price of robusta coffee in the local market is freezing export activities," Sang said.

Vietnam, the world's second largest coffee producer and exporter behind Brazil, produces mainly robusta coffee, which is often used for blending.

During the first six months of this year, the country exported 913,000 tonnes of coffee beans, earning $2 billion in turnover, according to the Ministry of Agriculture and Rural Development.