Arabica coffee futures for September delivery rallied 3.4% Thursday on broad-based speculative fund buying in commodities, bullish chart signals and continued tight stocks of top-quality arabica beans.
Nearby September coffee rose 5.65 cents, or 3.4%, to settle at $1.7305 a pound on ICE Futures U.S. in New York. The contract reached a high of $1.7460--its strongest price since June 24.
The climb was spurred mainly by technical buying once prices bust out of former chart resistance at $1.7000 a pound, where pre-programmed buy stops were activated, a New York-based broker said.
Coffee futures hadn't topped $1.7000 since June 28, creating pent-up buying interest above the market. Fund participation in coffee, which had been negligible in recent weeks owing to the market's seasonally slow summer period, was reignited by the bullish move.
"The funds took a little bit of profit in the last week or two, but they are having their way with coffee now," said James Cordier, analyst and president of Liberty Trading Group in Tampa, Fla.
Coffee prices continue to be underpinned by tight stocks of top-quality arabica beans, which won't be replenished until the fall, when Colombia and Central America begin their harvests. Colombia is the world's largest grower of mild washed arabica beans. Adverse
"In September and October we're going to get some relief from the tight stocks, but until then there aren't any high-quality arabica beans that are going to just come out of the woodwork," said Cordier.
The arabica harvest in Brazil--the world's largest coffee producer--was 58% complete as of July 21, up from 53% in the comparable year-ago period, local agricultural consultancy Safras & Mercado said.
While the Brazilian coffee harvest progresses, aided by dry weather, aggressive origin selling in coffee has remained at bay, allowing futures to climb, the broker said. Brazilian beans aren't deliverable against ICE coffee futures, however, because they don't meet current exchange specifications.
The coffee rally was aided by gains in the commodity indexes. A weak U.S. dollar and a better-than-expected weekly jobless claims report sparked fund buying nearly across the board as traders added riskier bets to their portfolios on ideas economic activity may increase.
ICE September coffee came within 1.9 cents of hitting the 12-year high of$1.7650 established June 24.
The strong close is expected to set the market up for further gains, where bullish traders will likely target a new 12-year high above $1.7650, said Cordier.
ICE warehouse stocks fell 5,640 bags, to total 2.115 million bags, the exchange reported.
Total open interest on ICE rose 1,111, to 167,487 contracts.
Volume was pegged at 29,293 contracts traded, with 10,763 calls and 7,613 put options traded.
ICE Change (cents) Range
Sep $1.7305 up 5.65 $1.6645-$1.7460
Dec $1.7375 up 5.40 $1.6740-$1.7540
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