Vietnam Coffee-High prices mean farmers are in no rush to sell
    * Domestic prices up around 60 pct since Jan 2010
   * Discounts widen as London gains
   By Ho Binh Minh 
   HANOI, Jan 18 (Reuters) - Coffee trading in Vietnam, the world's second-largest producer after Brazil, is likely to remain lacklustre until a holiday next month, as slow sales by farmers and bank credit limits stop exporters buying, traders said. 
   In the past, farmers have tended to sell a lot of beans in January to get money for Tet, the country's Lunar New Year festival, but that has not happened since 2007 because of high prices.  
  

   "Instead of selling two tonnes, farmers can now sell one and still have enough cash for expenses, so they aren't rushing to sell," said an executive at a major coffee export company based in Buon Ma Thuot city, the capital of Daklak province. 
   Domestic prices ranged between 38.6 million and 38.8 million dong ($1,980-$1,990) a tonne on Tuesday in the country's main growing province of Daklak, having soared around 60 percent over the past year. 
   "Farmers are now smarter, selling slowly as they benefit from higher prices," said a trader at a foreign company based in Ho Chi Minh City.  
        
     Vietnam ended its coffee harvest in late December, about two weeks earlier than usual, as growers tried to save costs due to more expensive labour and to protect the crop from thieves attracted by rising prices. 
   The hasty harvest has resulted in smaller beans in some areas, including Daklak, as farmers picked both ripe and unripe cherries, traders said. A high volume of small beans means there are fewer high-quality beans for export. 
   The International Coffee Organization estimates the October 2010/September 2011 crop will be 18 million bags, down 1.1 percent from the previous harvest.      
   BANK LOANS LIMITED 
   Another barrier to coffee trade at the moment is a lack of funding, since banks have not stepped up credit in line with higher prices, said the Daklak executive, who asked not to be identified by name. 
   A loan of 10 billion dong will help exporters buy around 260 tonnes of coffee from the domestic markets now. A year ago it would have bought 400 tonnes. 
   Prices rose in Daklak on Tuesday from 38.4 million dong on Monday and 37.8 to 38.2 million dong a week ago, tracking a gain on London's robusta futures market, where the March contract <LRCc2> ended $16 higher at $2,140 a tonne on Monday. 
   Last week the contract hit $2,185, the highest level for the benchmark second month since September 2008. [ID:nLDE70G1AA] 
   Exporters offered to sell robusta grade 2, 5 percent black and broken beans at a discount of $150 a tonne to London's March contract, while bids stood at $160-$170 per tonne, widening from discounts of $140-$150 per tonne last Tuesday. <COFFEE/ASIA1> 
   The Daklak-based executive said several cargoes due for loading this month may face delays because the buyer and seller agreed their contract price last November before prices rose on the London market. 
   But the trader in Ho Chi Minh City disputed the exporter's view, saying he saw no risks in trading now and that his company had been taking good deliveries from Vietnamese suppliers. 
   Vietnam's coffee market will be effectively closed between Jan. 31 and Feb. 7 for Tet festival to mark the Lunar New Year, which starts on Feb. 3. ($1=19,495 dong)
 
 (Reporting by Ho Binh Minh; Editing by Alan Raybould)  
    
Tuesday, 18 January 2011 14:09:39RTRS