Vietnam coffee premium shrinks as London futures prices advance

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Buyers of coffee from Vietnam, the world's biggest grower of the robusta variety, are paying a smaller premium for their beans after futures prices in London climbed, according to trading company NC Group Ltd.

Vietnamese coffee for immediate shipment was at a premium of $5 to $10 a metric ton to the price of the September contract on the NYSE Liffe exchange in London, the trader said in a report e-mailed on Wednesday. That compares with $20 a ton on July 2. Robusta coffee for September delivery advanced 2.7 percent over the past week in London.

The "differential level eased back $10 to $15 due to the recent increase in the terminal price," Nguyen Chi Cuong, chief executive officer at the company, which has a trading office in Ho Chi Minh City, Vietnam, wrote in the report.

Differentials refer to a premium or discount to obtain physical coffee in relation to the futures price.

Robusta futures climbed as arabica coffee advanced on speculation rains that are delaying the harvest in Brazil, the world's biggest coffee producer, will damage the beans, lowering their quality. Arabica coffee rose 8.9 percent in the past week on ICE Futures US in New York.

"London coffee has almost become a forgotten uncle over the last few sessions as New York takes all the glory," London- based futures and options broker Sucden Financial Ltd. said in a daily report e-mailed on Tuesday. "Gradually, robusta prices improved, almost reluctantly in New York's shadow."

Arabica coffee is grown mainly in Latin America and is favored for specialty drinks such as those made by Starbucks Corp. Robusta beans, harvested mainly in Asia and parts of Africa, are used for instant drinks and espresso.

NC Group was established in 2004 and trades natural rubber and coffee. The company sells 80,000 to 150,000 bags of coffee a year. Cuong was previously a coffee trader in Vietnam with Noble Group Ltd.

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