Robusta beans from Vietnam's new crop were offered this week but there were no reports of deals as exporters stayed on the sidelines, hurt by uncertainties over tax refunds, dealers said on Thursday.
Physical trading was equally slow in rival Indonesia, with many domestic roasters already well covered. Foreign buyers expect premiums for Indonesian beans to drop when robusta from Vietnam begins entering the market in November.
Robusta grade 2, 5 percent black and broken beans from the yet-to-be harvested crop was offered at premiums of $10 to London's November contract. There were no offers last week.
Beans from the old crop stood at premiums of $100 a ton, down slightly from $110 last week. Robusta is either blended with arabica beans for a lower-cost brewed coffee or processed into instant coffee.
"Nobody wants to buy coffee, unless it's necessary. Old crop coffee is still on offer but I guess everybody is waiting for beans from the new season," said a dealer in Singapore. "There's no use to buy beans now."
Some exporters were also reluctant to strike deals because of loopholes in Vietnam's system governing value-added-tax (VAT) payments and refunds for exportable goods.
Exporters pay a 5 percent VAT when buying beans from local traders and get a refund once exports are completed. But errant traders do not declare the tax payment, preventing exporters from claiming VAT refunds, dealers and state media say.
The tax dodge, which has alarmed major world trade houses and roasters, was partly responsible for recent declines in exports, some dealers said.
"The harvest time of the new crop is approaching rapidly in Vietnam and the VAT problem is probably at the center of intense discussions or negotiations within government," SW Commodities said in a report.
"But so far no information has been made available to the coffee sector."
Vietnam's next crop is forecast to hit a record 25 million 60-kg bags in the season to September 2014, a Reuters poll shows.
Higher-quality grade 1, screen 16 beans, which are the equivalent of Indonesia's Sumatra 4, 80 defect beans, were offered at premiums of $160 a ton, steady with last week's levels of $150 to $170 to London futures.
Vietnam and Indonesia together account for about 24 percent of global coffee output. Sumatran premiums were unchanged from last week at $80 to $100 to London futures.
"Buyers have disappeared recently. They may be willing to buy at premiums of $60. There could be deals at $80 premiums, but the volume must be very small," said a dealer in Sumatra, which is Indonesia's main growing island.
"It seems local roasters are well covered, their warehouses are full."
Indonesian premiums could stay at current levels next week, while trading is likely to be slow in Vietnam because of the VAT issue.