Robusta coffee gained in London after rallying the most since 2011 yesterday as investors closed out bets on lower prices due to low stockpiles and falling exports from top grower Vietnam.
Bean inventories in warehouses monitored by the NYSE Liffe exchange stood at 45,900 metric tons on Nov. 25, the lowest since at least 2002, exchange data showed.
That's below the 52,000 tons a Bloomberg survey of 10 traders published in August forecast for the end of the year.
Stockpiles are now below the "critical level," said Hernando de la Roche, a Miami-based senior vice president at INTL FCStone Inc.
Vietnamese shipments fell to 80,000 tonnes last month, said the General Statistics Office in Hanoi.
That's down from 122,000 tonnes in the same period a year earlier.
The beans used to make instant coffee are trading at a premium to the exchange price, says Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd.
Money managers cut bearish bets on robusta coffee to a six-week low in the week ended Nov. 26. "The market has been building to this kind of move for a while as the cocktail of low certified stockpiles, high Vietnamese differentials, speculative and fund shorts and option open interest at key strikes begins to hit the back of the throat," ABN Amro Clearing Bank said in a report e-mailed today.
Differentials refer to a premium paid or a discount obtained for physical coffee in relation to futures prices.
Vietnamese Beans
Vietnamese beans for December and January shipment were at a premium of $50 a tonne over the futures last week, Winterthur, Switzerland-based Volcafe said on November 29.
Money managers cut their net-short, or wagers on falling prices, to 6,491 futures and options as of November 26, the lowest level since October 15, NYSE Liffe data showed.
Robusta coffee for January delivery was $37 a ton more expensive the the futures for March, up from $10 a ton a week earlier.
That market structure, in which earlier-dated contracts are more expensive than deferred ones, is know as backwardation and may signal limited supplies.
Futures gained 11 percent last month as Vietnam held back supplies. "It looks like London has the appetite for more upside, leaving the question of where Vietnam will draw their line in the sand" ABN Amro said.
Record Crop
The recent price increase may not last as the nation is set to harvest a record crop in the 2013-14 season started Oct. 1, Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report e-mailed today.
Volcafe forecasts the crop at 30 million bags and Macquarie Group Ltd. at 29 million bags.
Refined, or white, sugar for March delivery gained 0.2 percent to $452.80 a ton in London.
Raw sugar for the same month rose 0.2 percent to 16.84 cents a pound in New York.
Cocoa for delivery in March fell 1.1 percent to 1,732 pounds ($2,834) a ton on NYSE Liffe.
Cocoa for the same month slid 1.3 percent to $2,772 a ton on ICE, with futures trading volumes 16 percent above the average for the past 100 days for the time of day, data compiled by Bloomberg showed.
