Indonesia's trade and industry minister said on Monday that the country would introduce a tax on exports of commodities to support the domestic industry.

But traders were treating the comment with caution while elections are just days away.

"(They) Vietnamese have stopped widening differentials from around $250 under (per tonne). We're not happy," said one trader.

"Even if the market drops further, they (differentials) may go up towards $200 again," the trader said, adding it would be in their interests to sell at current prices which were firmer than a few weeks ago.

They said the sellers were holding back as the world coffee market watches Brazil which is entering a sensitive periodfor potential frost damage to its crop.

In London on Friday, the active July contract was last traded at $1,503 per tonne, down $55 from the previous day but well above levels earlier this year of around $1,400. The market was closed on Monday for UK national holiday.

Traders were divided over how much coffee Vietnamese farmers and middlemen still had left from the previous crop, with estimates ranging from 60,000 to 120,000 tonnes.

Many traders argued that the stock should be brought to the market to avoid overlapping with the next crop due in October and competition from Indonesia, Thailand, Africa and Brazil.

The first trader added: "If there is no frost in Brazil, then Brazil is going to have a good crop. Roasters might switch from high-end of robusta towards arabica, which would decrease the use of robusta."

Yet some said Vietnamese could hold on to their stocks, possibly to mix them with the new crop, as fat profits over the past few years cushioned their financial positions.

With only sixdays to go to the Indonesian elections, the first in nearly 50 years, the country's coffee market had ground to a halt, despite the ongoing harvest which should peak later this month, traders said.

They said not much coffee was coming into the Port areas as farmers and middleman held back and used coffee to hedge against a potential depreciation of the rupiah ahead of the election. The rupiah on Tuesday was above 8,000 to the dollar, compared with below that last month.

Differentials were bid at around $220 per tonne under London prices, while supplier offers were $195-$200 under London, they said.

"People don't want to offer much forward," another trader said. "Prices are more expensive than you would have imagined."

Traders said talk of export tax and too much rain in some parts of the country added to the uncertainties.

While Indonesian Trade and Industry Minister Rahardi Ramelan said on Monday that the country planned to tax exports of coffee, cocoa, rubber and copra to protect the agriculturalindustry, he gave no details or the timing of its introduction.

"It depends on who wins the elections and what happens after that," said the first trader. "It will only make their commodities less attractive versus other countries. So there's lot of resistance from local exporters coming in."