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Vietnam Coffee Premium Seen by Volcafe Rising 23% on Thin Trade

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 thin trading and low availability, according to Volcafe Ltd.

Vietnamese beans for shipment in November and December were last week at a premium of $160 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 on Sept. 27. That’s up from $130 a ton in the previous 7-day period.

“The physical market up-country is very thin and premiums are high,” Volcafe said in the report. “Short covering becomes active once supply avails,” the trader said, referring to the closing out of bets on lower prices.

Vietnam will enter its 2013-14 coffee season next month and growers may harvest a record 30 million bags of coffee, Volcafe estimates. A bag of coffee weighs 60 kilograms (132 pounds). Robusta coffee futures fell 8.8 percent this month and 7.8 percent this quarter because of a large crop in Vietnam.

“The robusta harvest is still in its very early stages and seasonal rains make drying difficult,” Volcafe said. Once beans are harvested, they need to be dried before being sold.

In Indonesia, the world’s third-biggest robusta grower, deliveries from farms slowed to 7,000 tons last week, 5,000 tons less than in the previous 7-day period, Volcafe said. Harvesting of the 2013-14 crop started in Indonesia in April and Nedcoffee BV, a trader in Amsterdam, estimated farmers had gathered 92 percent of the crop by Sept. 6.

Indonesian Beans

Indonesian beans for shipment in November and December were last week at a premium of $130 a ton to the exchange price, down from a premium of $140 a ton in the previous 7-day period, Volcafe said.

The flowering season there started in coffee areas and may provide a “good prospect” for next year’s crop provided there’s no excessive rainfall, Volcafe said. Flowers become the cherries that contain the beans to be harvested next year.

Robusta coffee for delivery in November was 0.7 percent higher at $1,622 a ton by 11:06 a.m. in London.

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