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Robusta Coffee Moves Into Backwardation on Vietnam Supply Worry

Robusta coffee for March delivery became more expensive than the May contract today on concerns roasters may tap European stockpiles as farmers in top producer Vietnam hoard beans.

Beans for March delivery commanded a premium of $21 a metric ton to May-delivered coffee by 5:02 p.m. London time. That moved the market into so-called backwardation, a situation in which front-month contracts are priced above deferred ones and potentially signaling tight supplies.

Robusta coffee inventories in warehouses monitored by the NYSE Liffe exchange in London have fallen since July 11, data on Bloomberg show. Inventories stood at 236,320 tons as of Jan. 23, according to the exchange. Farmers in Vietnam are holding back beans awaiting higher prices after rates slumped 14 percent in London last year.

“In Vietnam, the world’s largest robusta producer, coffee farmers are holding back 60 percent of their crop, waiting for better prices,” Lysu Paez, an analyst at Natixis SA in Paris, wrote in a weekly report e-mailed today. “This situation has been supportive for robusta prices.”

Robusta coffee for March delivery rose 3.8 percent to $1,950 a metric ton in London. The price has climbed 7.7 percent this year. Liffe will update inventory figures later today.

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