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Singapore. Robusta coffee from top producer Vietnam was traded at premiums for the first time since at least May 2010, while Indonesian roasters snapped up any beans on offer as supply worries lingered, dealers said on Wednesday.

Vietnam's robusta grade 2, 5 percent black and broken beans, changed hands at premiums of between $20 and $60 to London's September contract on thinning stocks ahead of the next harvest and after strong exports earlier this year.

“We've been buying Vietnamese coffee at London levels or at premiums of $20. There's not much stock in the hands of farmers,” said a dealer in Singapore, who trades Vietnamese and Indonesian coffee.

“There will be some tightness in Vietnam from now until the new crop arrives in October."

Robustas from Vietnam are normally offered at a discount to London futures due to problems with shipments and quality, but consumers are expected to buy the beans at premiums because of limited offers before the next season, dealers said. 

The beans stood at a discount of $20 last week and up to $155 in January. London's September contract closed at $2,479 a ton on Tuesday, up from $2,449 in the previous session. 

"Earlier this week, the premiums stood at $30 to $40, but they have increased a lot to $50 to $60 now for grade 2-5 percent black and broken," said another dealer, who trades Vietnamese robusta.

"There's a little bit of trade at those levels." 

Supply problems in Vietnam and second-largest robusta producer Indonesia could further lift sentiment in the global coffee market, which has seen the price of arabica rising to 34-year highs due to a scarcity in the high-quality variety.            

Vietnam, which accounts for 14 percent of global coffee output, is forecast to have a bumper harvest of 22 million to 24 million bags in the crop year to September 2012, from 20 million to 22 million bags in the current crop ending September.

Vietnam's May coffee exports exceeded market expectations and rose an estimated 10.6 percent from the same month in 2010 to 110,000 tons, but shipments in June would drop to between 65,000 tons and 80,000 tons.

In Indonesia, exporters in the main growing island of Sumatra are struggling to get beans after persistent rains caused a shift in harvesting time, which eventually damaged coffee cherries. 

Export-grade 4, 80 defect beans were steady at premiums of $100 above London's July contract , their highest since November 2009.

"The demand is mostly from roasters in Java because their own production is also falling. They are still looking for beans from Sumatra," said a dealer in Bandar Lampung, the provincial capital of Lampung on Sumatra.

"There's interest from foreign trading houses, but nothing has been done because the price is very high." 

Dealers expected premiums for Vietnamese beans to stay high next week, but farmers in Indonesia could be tempted to sell remaining stocks from the current crop ahead of the Muslim month of fasting in August.

 "We'll see if they still want to hold on to their beans or sell them. Supply is extremely very tight," said the dealer in Bandar Lampung.  

Indonesia's coffee output may fall 15-20 percent in the 2010/11 (Oct/Sept) crop year to as low as 520,000 tons, as rains damage coffee cherries, said the Indonesian Coffee Exporters Association.


Reuters