Stocks of certified robusta coffee stood at just 76,790 tonnes last week, down nearly 37 percent since the start of the year. The last time certified stocks were at those levels was July 2014, a spokeswoman for the Intercontinental Exchange said.
Industry sources said the drawdown was partly driven by strong buying interest in the certified coffee on offer, some of which was deeply discounted and dramatically cheaper than coffee on the spot physical market.
Under exchange rules, coffee stocks are subject to age discounts after 13 months. The amount is calculated per calendar month, which means that once the coffee is several years old the discounts can become very large.
"There was quite a lot of old coffee in there, which has been sold," one European dealer said. "It was old but it was cheap, so people saw quite good value in it. And the differentials (in origin) were not attractive."
Robusta output in Vietnam, the world's biggest producer of the variety, rebounded in the 2017/18 season after damaging rains curbed production the previous year.
But physical prices in the country remained firm throughout the current season, with beans in the country trading at discounts between $30 and $60 per tonne, according to traders.
By comparison, certified stocks of Brazilian robusta beans - known as conillons - from the 2014/15 crop were being offered at a discount as deep as $130 per tonne, dealers estimated.
Industry sources say this made the London futures market an attractive source of bargain supplies of robusta beans, a cheaper variety often used in instant coffee.
DWINDLING STOCKS
The dwindling stocks have lent support to spot futures prices, which last week surged to their highest since November. But the drawdown has also led to a rise in nearby premiums, making it more expensive for traders to hold stocks.
Last week, physical differentials in origin countries weakened sharply, which traders hope will inspire more beans to be graded and certified for delivery on the London futures market.
Grade 2 robusta beans in Vietnam and newly harvested conillon supplies in Brazil were both trading at a discount of $100-120, dealers estimated.
"The farmers have been struggling to find buyers - but it looks like people are now buying at these levels," said a second European trader.
"And if it goes to the board, it could replenish the (certified stocks) and ultimately get the market back into carry."
Dealers said the weakening differentials have inspired some exporters to ship coffee from origin countries in a scramble to deliver against the London May contract, which expires at the end of the month.
But they noted it is still unclear if current differentials will be enough to draw coffee to the exchange from the July position onward, since new rules coming into effect will add extra costs to forward contracts.
"We're still nowhere near tenderable parity with the new rules, even with the differentials much lower in origins," said a third trader. "So people are not going to be able to tender much coffee at the moment."