By Claudia Carpenter Aug. 27 (Bloomberg) -- Coffee rose for a second day in London as reduced supplies of arabica beans contributed to stronger demand for the cheaper robusta variety. Arabica traded in New York costs about $1 a pound more than robusta, heading for the widest closing monthly spread since at least January 2008, according to data compiled by Bloomberg. Trading based on price gaps in different markets is known as arbitrage. Arabica prices rose to a 12-year high four days ago, and bean inventories in warehouses monitored by ICE Futures U.S. in New York dropped to a 10-year low yesterday. “Volatility on the arbitrage is massive,” said Angus Kerr, owner of coffee trading company Coffee ag in Cobham, England. “People can’t use that as a hedging tool” to protect against higher prices, he said. Robusta for November delivery rose $12, or 0.8 percent, to $1,609 a metric ton (72.98 cents a pound) at 11:12 a.m. London time on NYSE Liffe. Arabica for December delivery was little changed at $1.725 a pound on ICE. Inventories of arabica in ICE-monitored warehouses were 2.02 million bags yesterday, the lowest since May 2000. Robusta stockpiles, by contrast, climbed 0.1 percent in the two weeks ended Aug. 23, NYSE Liffe said in a report on its website after trading ended yesterday. Cocoa for September delivery on NYSE Liffe climbed 0.4 percent to 2,030 pounds ($3,148) a ton. In New York, the December cocoa contract rose 0.5 percent to $2,754 a ton. White, or refined, sugar for October delivery dropped 0.6 percent to $566.60 a ton on NYSE Liffe. Raw sugar for October delivery climbed 0.8 percent to 19.42 cents a pound on ICE. To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

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