Beans from the 2011-12 season are selling at a discount of $20 to $40 a metric tonne to the price on the NYSE Liffe exchange in London, according to three traders, who have direct knowledge of the prices and declined to be identified because they aren't authorised to speak to the media. The discount was $30 to $40 a tonne a week ago and $50 to $60 a tonne on October 7.

"The prolonged rains did slow things down, but there is no indication to believe the crop is going to suffer in size," Volcafe, the coffee unit of commodities trade ED&F Man Holdings Ltd, said in a report to clients e-mailed today.

Vietnam will produce a record 22 million bags in the 2011-12 season started last month, Volcafe estimated in its latest quarterly report. The nation's output last season was 20 million bags, the Winterthur, Switzerland-based trader estimated. Rains delayed the start of the crop.

"Slowly but surely, the coffee is ripening and the drying spaces are filling up," Volcafe said in the report. "The flow, however, is not as big yet as predicted."

The discount has also narrowed because local exporters held back sales, three traders said on October 28. Coffee exporters in Vietnam are being urged not to sign so-called forward contracts unless they have beans in hand, after some companies didn't honor deals earlier this year. Forward contracts are sales of future production at a specified price.

Robusta coffee for January delivery slid $32, or 1.7 percent, to $1,809 a tonne by 4:45 p.m. on NYSE Liffe in London. Robusta beans are used in instant coffee and are grown mainly in parts of Africa and Asia.

Bloomberg - November 4, 2011