NEW YORK (Dow Jones)--Coffee prices stumbled back from nearly 12.5-year highs Monday on indications the rally had outpaced the underlying fundamental picture.
Nearby coffee for September delivery ended 3.80 cents, or 2%, lower at $1.7250 a pound on ICE Futures U.S. In early trading the contract hit $1.8150, the highest level for a nearby coffee contract since Feb. 6, 1998.
Coffee prices have sky-rocketted nearly 25% since June 1. Two seasons of poor coffee harvest in Central America and Colombia--locations key to premium bean production--were quickly built into prices. A noticeable decline in exchange coffee stocks pushed prices higher, which attracted interest from speculators such as banks and hedge funds.
The market's mammoth move may have overestimated physical coffee supply and demand, said Spencer Patton, founder and chief investment officer at Steel Vine Investments in Chicago.
"The fundamentals just don't seem to justify this move up," Patton siad.
Coffee futures trading will likely continue to be a volatile affair until the market establishes a visible price range, said Spencer Patton, founder and chief investment officer at Steel Vine Investments in Chicago. The September contract has support near the $1.70--the point from which it broke higher last week, Patton said.
"Coffee just finally got into a profit-taking situation after the move we've had here," said Jack Scoville, vice president at Price Futures Group in Chicago. "Any retracement is going to look kind of ugly."
Scoville said producers in Central America have been fixing prices for the new crop, which weighs on the futures market as fresh short positions indicate more availability of beans in demand.
Brazil's arabica coffee harvest continues at a brisk pace, reaching 63% as of July 28, local agricultural consultancy Safras & Mercado said. Brazil's robusta coffee--typically used in blends--is 99% harvested as of July 28, Safras said.
ICE coffee warehouse stocks decreased by 6,426 60-kilogram bags Monday to total 2.1 million bags, according to exchange data.
ICE coffee open interest--the number of active positions left at the end of the session--decreased by 581 lots Friday to total 169,398 lots, according to exchange data.
Volume was estimated at 31,045 lots, according to exchange data. In options, approximately 6,970 calls and 6,415 put options traded on the floor.
ICE Change Range
Sep $1.7250 -3.80c $1.7205-$1.8150
Dec $1.7330 -3.50c $1.7280-$1.8155
Nearby coffee for September delivery ended 3.80 cents, or 2%, lower at $1.7250 a pound on ICE Futures U.S. In early trading the contract hit $1.8150, the highest level for a nearby coffee contract since Feb. 6, 1998.
Coffee prices have sky-rocketted nearly 25% since June 1. Two seasons of poor coffee harvest in Central America and Colombia--locations key to premium bean production--were quickly built into prices. A noticeable decline in exchange coffee stocks pushed prices higher, which attracted interest from speculators such as banks and hedge funds.
The market's mammoth move may have overestimated physical coffee supply and demand, said Spencer Patton, founder and chief investment officer at Steel Vine Investments in Chicago.
"The fundamentals just don't seem to justify this move up," Patton siad.
Coffee futures trading will likely continue to be a volatile affair until the market establishes a visible price range, said Spencer Patton, founder and chief investment officer at Steel Vine Investments in Chicago. The September contract has support near the $1.70--the point from which it broke higher last week, Patton said.
"Coffee just finally got into a profit-taking situation after the move we've had here," said Jack Scoville, vice president at Price Futures Group in Chicago. "Any retracement is going to look kind of ugly."
Scoville said producers in Central America have been fixing prices for the new crop, which weighs on the futures market as fresh short positions indicate more availability of beans in demand.
Brazil's arabica coffee harvest continues at a brisk pace, reaching 63% as of July 28, local agricultural consultancy Safras & Mercado said. Brazil's robusta coffee--typically used in blends--is 99% harvested as of July 28, Safras said.
ICE coffee warehouse stocks decreased by 6,426 60-kilogram bags Monday to total 2.1 million bags, according to exchange data.
ICE coffee open interest--the number of active positions left at the end of the session--decreased by 581 lots Friday to total 169,398 lots, according to exchange data.
Volume was estimated at 31,045 lots, according to exchange data. In options, approximately 6,970 calls and 6,415 put options traded on the floor.
ICE Change Range
Sep $1.7250 -3.80c $1.7205-$1.8150
Dec $1.7330 -3.50c $1.7280-$1.8155
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