Vietnam Coffee Seen Switching to Discount on Season Start

Buyers of coffee from Vietnam, the largest producer of the robusta variety, are getting a discount for their beans as pressure to sell stockpiles increases with the beginning of the new season, Volcafe Ltd. said.

Vietnamese coffee for shipment in October and November was trading at a discount of $30 a metric ton to the price on the NYSE Liffe exchange in London, Volcafe, the Winterthur, Switzerland-based coffee unit of commodities trader ED&F Man Holdings Ltd. said in a weekly report e-mailed today. That compares with a premium of $20 a ton last week.

“Differentials are coming down both for the present as well as new crop,” the trader said in the report, referring to the discount or premium paid to obtain physical coffee in relation to the price on the futures market. “Pressure to liquidate current stock is increasing.”

Vietnam produced a record 27 million bags of coffee, each weighing 60 kilograms (132 pounds), in the 2011-12 season ended Sept. 30, the trader estimates. The 2012-13 crop that started this month is developing “somewhat unevenly” and it’s “in good shape,” Volcafe said. Initial projections point to a crop of 26 million bags in Vietnam this year, according to Volcafe.

“The country continues to reap the rewards of renovation with various new high-yielding robusta hybrids,” it said. “Demand continues as always strong as the new season gears up.”

In Indonesia, the third-biggest robusta grower, bean deliveries from farms slowed as harvesting approached the end, according to the report. Arrivals were 4,000 to 4,500 tons this week, it said, without providing figures for a week earlier.

“According to local estimates, approximately 10 percent to 15 percent of the coffee from the highland areas is still to be harvested,” Volcafe said. “We expect that the main crop will finish around the end of October.”

Buyers of Indonesian beans for shipment in October and November were paying a premium of $10 a ton to the exchange price, down from $40 a ton last week, it said.

Robusta coffee for November delivery slid 1 percent to $2,131 a ton by 12:05 p.m. in London.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.

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