Coffee farmers in Vietnam, the biggest producer of robusta used in instant drinks, have the largest stockpiles of unsold beans in four years as they prepare for a record harvest, according to a survey. Prices advanced.
Growers hold 120,000 metric tons from the previous crop, 45 percent more than 83,000 tons a year earlier, according to the median of eight trader and shipper estimates compiled by Bloomberg. They are keeping the beans to await a price rally and as exporters slow purchases because of tax-refund delays. Farmers will reap 1.7 million tons in the coming season, 13 percent more than a year earlier, the survey showed.
Futures traded in London slumped 12 percent in the past two months and touched a three-year low last week on expectations global supplies of beans used by Nestle SA (NESN) will outpace demand. Growers in India are also holding back sales, said Volcafe Ltd. on Sept. 20. Most of the crop in Indonesia, the largest robusta producer after Vietnam and Brazil, has already been harvested, according to Amsterdam-based trader Nedcoffee BV.
"I still have some coffee left from the old crop but I don't want to sell," said Nguyen Van Tap, a farmer who owns about 2.5 acres (1 hectare) in Dak Lak province, which supplies 30 percent of the country's harvest. "Prices aren't good and I don't need the money right now."
Bean prices in Dak Lak rallied 1.7 percent to 35,900 dong ($1.70) a kilogram (2.2 pounds) from 35,300 dong yesterday, the lowest level since December 2010, data from the Trade & Tourism Center show. Futures rose 0.1 percent to $1,644 a ton on NYSE Liffe at 3:34 p.m. London time, extending yesterday's 1.9 percent jump. The price dropped to $1,596 on Sept. 27.
Exporters can normally claim a refund of the 5 percent value-added tax on coffee trade. Rebates are being delayed because authorities are checking documentation along the supply chain after reports some local traders are avoiding the tax, newspaper Nong Nghiep reported Sept. 25, citing Nguyen Nam Hai, general director of state-owned Vietnam National Coffee Corp.
The holdup is "really causing us a headache," said Le Tien Hung, Dak Lak-based deputy director of Sept. 2nd Import-Export Co. "Exporters don't dare to buy coffee from the market because they're afraid they may not get their tax money back if someone in the supply chain didn't pay."
The Ministry of Finance will discuss the issue with companies and the Vietnam Coffee and Cocoa Association this week, Do Hoang Anh Tuan, deputy minister, said in an interview Sept. 27. The ministry will consider allowing about 130 "good" companies, which represent 90 percent of exports, to get VAT refunds before authorities check their documentation, he said.
"If the government listens to our proposal, the government will be able to resolve the issue," said Nguyen Xuan Thai, a board member of Vicofa, which asked for the tax to be scrapped because most production is for export. Shipments from Vietnam dropped 23 percent to 1.04 million tons in the first nine months, the General Statistics Office said Sept. 25.
Global robusta harvests will expand 3.8 percent to 65.3 million bags (3.92 million tons) in 2013-2014, exceeding a 1.6 percent gain in demand to 63.8 million bags, Macquarie Group Ltd. (MQG) said in August. A bag weighs 60 kilos (132 pounds).
Farmers in Indonesia's southern Sumatra, the main growing region, harvested 92 percent of the crop, Nedcoffee BV said Sept. 17. Bean deliveries from farms slowed to 7,000 tons last week, 5,000 tons less than in the previous seven-day period, according to Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd.
Shipments from southern Sumatra jumped 72 percent to 55,470.50 tons in September from a month earlier, when Indonesia had a week-long holiday, the Lampung trade and industry office said in a statement today. That compares with 55,709 tons shipped in July, the most since June 2009, and 18,488 tons in September 2012.