Vietnam coffee premium seen rising amid thin farmer inventories

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Buyers of coffee from Vietnam, the world's largest producer of the robusta variety used in instant drinks, are paying a higher premium for their beans amid low supplies from farmers, according to Volcafe Ltd.

Vietnamese beans for shipment this month and the next are at a premium of $130 a metric ton to the price on the NYSE Liffe exchange in London, the Winterthur, Switzerland-based coffee unit of commodities trader ED&F Man Holdings Ltd. said in a report e-mailed today. That's up from $120 a ton last week.

The "local market unexpectedly tightened due to very thin physical supply from farmers," Volcafe said. The "farmgate price continues to trade at par or at premium to Liffe and farmers hold back if the price is lower than 39,000 dong ($1.85) a kilogram (2.2 pounds), consequently exporters also hold back offers."

Vietnam will produce a record 30 million bags of coffee, each weighing 60 kilograms, in the 2013-14 season that starts in October, the trader estimates. That's up from 26 million bags in the season ending this month. Robusta coffee futures fell 5 percent in London last month. Stockpiles in Ho Chi Minh City fell 700,000 bags to 1.9 million bags, according to the report.

The "main focus is on the new crop, with buyers expecting prices to weaken in the next months as the harvest slowly gets under way," Volcafe said. "Warehouses are being emptied."

In Indonesia, the world's third-biggest robusta grower, bean deliveries from farms amounted to about 23,000 tons this week, the trader said. That's down from 24,000 tons last week.

Local prices were 19,400 rupiah ($1.68) to 20,600 rupiah a kilogram compared with 19,500 rupiah to 20,300 rupiah a kilogram last week, Volcafe data showed. Beans for shipment this month and the next were at a premium of $130 a ton to the exchange price, unchanged from last week.

In India, Asia's third-biggest coffee grower, supplies have "slowed down" and the local market is bidding at higher prices, according to the report.

Robusta coffee for delivery in November was 0.5 percent higher at $1,769 a ton by 12:38 p.m. in London.

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