Vietnam '11-12 Coffee Crop Pre-Grading Possible -Liffe Executive

Vietnam '11-12 Coffee Crop Pre-Grading Possible -Liffe Executive
Dow Jones LONDON - NYSE Liffe could make permanent a pilot scheme to ensureVietnamese coffee meets exchange standards by the end of the 2011-12 season,according to Liffe's head of commodity product management. The Europe-based operator three months ago launched a pilot scheme to gradecoffee before it is shipped from Ho Chi Minh city, the main export port of theworld's largest producer of the robusta beans traded on Liffe. In an interview late Thursday, Peter Blogg told Dow Jones Newswires theproject, which will finish in October, helps exporters to secure financing forcoffee by attaching a futures value to the supplies at origin. Liffe will decide next month whether to make the scheme permanent. "Exporters want to be able to attach a futures value to the coffee before itgets shipped and banks prefer commodities with a futures value as a backstop,"he said. "I'm optimistic we could have it in place for the upcoming crop, so wecan catch at least part of that." Should it prove successful, it could be rolled out to other coffee producerssuch as Indonesia and Brazil, or even other commodities such as cocoa, he said. Vietnam is a key coffee supplier but traders say the growing number ofdefaults on supply contracts by domestic exporters, which they pegged atbetween 70,000 and 100,000 metric tons this season, is deterring buyers. Blogg said the scheme shouldn't directly affect the futures market as Ho ChiMinh won't be a delivery point for supplies, like in Europe and the U.S. But itcould "bring more transparency to the market as there will be more of an ideaof how much coffee in Vietnam is deliverable," he said. Under the plan, 50-ton parcels of coffee are held in warehouses, from whichsamples would be sent to the U.K. to be graded. If they pass, the supplies geta valid certificate for six months and won't need to be re-tested in London. And it could also help ease another long-term issue created by logisticalconstraints in European warehouses, an issue that has come into sharp focusthis year due to near-record high stocks sitting in ports such as Antwerp. Roel Vaessen, secretary general of the European Coffee Federation, whichearlier this year sent a letter to Liffe raising concerns about potentialbottlenecks in Europe's ports, said the scheme should "remove an element ofuncertainty so we have more flexibility when the coffee arrives." Blogg declined to comment on the letter itself and said the project wasn'tbeing driven "by any debate in the market about any movement of goods orregulations." But said it "could take some of the pressure off as today youhave to ship and wait for grading."