NEW YORK (Dow Jones)--Coffee prices ticked lower Wednesday as speculative fund traders took profits and scanned the horizon for the market's next move.
Nearby coffee for July delivery ended down 0.50 cent, or 0.3%, at $1.5860 a pound on ICE Futures U.S. Most-active September coffee settled 0.25 cent, or 0.2%, lower at $1.6050 a pound.
Despite losses this week, coffee prices have risen 19% in the last two weeks. Internal market momentum pushed prices higher behind a rally in London's Euronext NYSE Liffe market. The action attracted large speculators, such as banks and hedge funds, who saw the large move as a trading opportunity. Before the rally, coffee prices had held within a band of nearly 10 cents for much of 2010. Prices had underlying support from the scarcity of high-quality arabica beans after two years of poor harvest in Colombia and Central America. But a bumper crop expected from Brazil kept a lid on prices.
Now traders are calculating their next moves as prices aren't falling back as quickly as had been expected.
"The cards are in the funds' hands and they're easing out of positions," said Luis Rangel, vice president of commodity derivatives at ICAP Futures in Jersey City, N.J.
At the height of the rally, traders suggested that bean sales from Brazil's producers would kick prices lower as the upswing fizzled.
However, that point of sales may be three to four weeks away as the arabica harvest, which typically begins in June, got off to a late start this season, Rangel said. Roaster buying is unlikely to surface until September approaches $1.50, Rangel said. A less-supportive macroeconomic picture could trigger more fund sales, he noted.
However, some traders read coffee's staying power at high levels as an indicator of potential bullish activity.
"This is still a healthy corrective move--no big damage here," said a coffee broker based in Central America.
Brazil's incoming crop may total 55.3 million 60-kilogram bags, a large chunk of the 139.5 million record output figure estimated by the U.S. Department of Agriculture. World consumption is expected to reach only 131.5 million bags in the same time frame, the USDA said. However, Brazil's arabica production is pegged at 41.8 million bags. Only about 10% of those beans are likely to meet the high quality standards that are expected from Colombian and Central American coffees.
ICE coffee warehouse stocks decreased by 3,625 60-kilogram bags Wednesday to total 2.248 million bags, according to exchange data.
ICE coffee open interest--the number of active positions left at the end of the session--increased by 1,910 lots Tuesday to total 161,586 lots, according to exchange data.
Volume was estimated at 18,668 lots, according to exchange data. In options, approximately 5,517 calls and 6,452 put options traded on the floor.
ICE Change Range Liffe Change
Jly $1.5860 -0.50c $1.5750-$1.5985 Jly $1,551 +19
Sep $1.6050 -0.25c $1.5885-$1.6145 Sep $1,580 +11
-By Holly Henschen, Dow Jones Newswires; 212-416-2138 begin_of_the_skype_highlighting 212-416-2138 end_of_the_skype_highlighting;
holly.henschen@dowjones.com
(END) Dow Jones Newswires
06-23-10 1521ET
Copyright (c) 2010 Dow Jones & Company, Inc.
15:21 062310
Nearby coffee for July delivery ended down 0.50 cent, or 0.3%, at $1.5860 a pound on ICE Futures U.S. Most-active September coffee settled 0.25 cent, or 0.2%, lower at $1.6050 a pound.
Despite losses this week, coffee prices have risen 19% in the last two weeks. Internal market momentum pushed prices higher behind a rally in London's Euronext NYSE Liffe market. The action attracted large speculators, such as banks and hedge funds, who saw the large move as a trading opportunity. Before the rally, coffee prices had held within a band of nearly 10 cents for much of 2010. Prices had underlying support from the scarcity of high-quality arabica beans after two years of poor harvest in Colombia and Central America. But a bumper crop expected from Brazil kept a lid on prices.
Now traders are calculating their next moves as prices aren't falling back as quickly as had been expected.
"The cards are in the funds' hands and they're easing out of positions," said Luis Rangel, vice president of commodity derivatives at ICAP Futures in Jersey City, N.J.
At the height of the rally, traders suggested that bean sales from Brazil's producers would kick prices lower as the upswing fizzled.
However, that point of sales may be three to four weeks away as the arabica harvest, which typically begins in June, got off to a late start this season, Rangel said. Roaster buying is unlikely to surface until September approaches $1.50, Rangel said. A less-supportive macroeconomic picture could trigger more fund sales, he noted.
However, some traders read coffee's staying power at high levels as an indicator of potential bullish activity.
"This is still a healthy corrective move--no big damage here," said a coffee broker based in Central America.
Brazil's incoming crop may total 55.3 million 60-kilogram bags, a large chunk of the 139.5 million record output figure estimated by the U.S. Department of Agriculture. World consumption is expected to reach only 131.5 million bags in the same time frame, the USDA said. However, Brazil's arabica production is pegged at 41.8 million bags. Only about 10% of those beans are likely to meet the high quality standards that are expected from Colombian and Central American coffees.
ICE coffee warehouse stocks decreased by 3,625 60-kilogram bags Wednesday to total 2.248 million bags, according to exchange data.
ICE coffee open interest--the number of active positions left at the end of the session--increased by 1,910 lots Tuesday to total 161,586 lots, according to exchange data.
Volume was estimated at 18,668 lots, according to exchange data. In options, approximately 5,517 calls and 6,452 put options traded on the floor.
ICE Change Range Liffe Change
Jly $1.5860 -0.50c $1.5750-$1.5985 Jly $1,551 +19
Sep $1.6050 -0.25c $1.5885-$1.6145 Sep $1,580 +11
-By Holly Henschen, Dow Jones Newswires; 212-416-2138 begin_of_the_skype_highlighting 212-416-2138 end_of_the_skype_highlighting;
holly.henschen@dowjones.com
(END) Dow Jones Newswires
06-23-10 1521ET
Copyright (c) 2010 Dow Jones & Company, Inc.
15:21 062310
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