08/07: Coffee Futures Fall as Brazil's Crop May Escape Frost Damage

Arabica-coffee futures fell for the third time in four sessions after a weather forecaster said Brazil’s crop, the world’s largest, should be undamaged by frost this month. Cocoa also declined.

The prospect of freezing weather in the South American country sent coffee prices to a 12-year high in New York last month. The risk was lowered yesterday when Sao Paulo-based forecaster Somar Meteorologia predicted that Brazil’s main producing area probably will be frost-free through July.

“There were a lot of jitters off of the fact that some cold weather moved into the area earlier than usual,” said Tom Mikulski, a senior market strategist at Lind-Waldock, a broker in Chicago. “With no weather premium and the harvest moving along as scheduled, it’s hard not to be a little bearish right now.”

Arabica coffee for September delivery fell 0.95 cent, or 0.6 percent, to $1.621 a pound on ICE Futures U.S. in New York. Prices have jumped 19 percent this year.

Global coffee output will probably be 133 million to 135 million bags in the year that begins Oct. 1, the International Coffee Organization said today in an e-mailed report from London. That’s up at least 10 percent from the 120.6 million bags estimated for the current year.

Bigger Crops?

“There are indications that production levels are gradually increasing,” Nestor Osorio, ICO’s executive director, said in the report. “A return to normal production levels in a number of producing countries could contribute to the application of corrections as supplies of new crop arrive on the market.”

Brazil’s production may total about 50 million bags, the trade group said. A bag of coffee weighs 60 kilograms (132 pounds).

“Once the harvest is done, you’re going to see a large influx of coffee into the market,” Mikulski said. “If production numbers hold up, I don’t see any reason how this market could hang onto these levels.”

Cocoa futures for September delivery fell $12, or 0.4 percent, to $2,969 a metric ton in New York. Prices have gained 17 percent in the past year.

07/07: September Rallies 3.4%, Recoups Losses

Arabica coffee futures for September delivery rallied Wednesday, as bullish chart influences and the strength of key outside markets helped coffee to recoup Tuesday's sharp losses.

Most-active September coffee rose 5.40 cents, or 3.4%, to settle at $1.6305 a pound.

A combination of speculative buying and traders buying back previously sold positions lifted coffee, with an additional boost provided by outside market strength, traders said.

A gain of 2.9% in crude oil, a steady to weaker U.S. dollar and the Dow Jones Industrial Average up 2.4% encouraged traders to buy riskier commodity investments. The major commodity indexes posted gains of 1.5% to 2.3% on the day.

"Short term, coffee was oversold the last couple days on light volume," said Alonso Tomas, a coffee trader at Hencorp Futures in Miami.

In addition, bullish charts were an influence as traders closed an upside gap on the September chart that was left from Tuesday's lower opening. The desire to fill that gap during the session provided chart-watching bulls with ammunition, Tomas said.

Coffee futures were in "recovery mode" Wednesday on sentiment that Tuesday's losses were overdone, said Jack Scoville, an analyst and vice president at Price Futures Group in Chicago.

Fundamentally, supplies of quality arabica beans remain extremely tight and hedging pressure is muted.

"There's no deliverable grade coffee around. Brazil is not a deliverable origin" against ICE futures, "even if they did meet quality standards," said
Scoville.

Brazil is the world's largest coffee grower, but its crop isn't deliverable against ICE futures, which are high-quality washed arabica beans. Poor harvests in Mexico, Colombia and Central America have left the highest-quality beans in very short supply.

Coffee output in Colombia, however, is expected to climb this year on improved growing weather.

Colombian coffee production will likely reach between 10 million and 10.5 million bags, up from 7.8 million in 2009, Colombia's National Federation of Coffee Growers, or Fedecafe, said Wednesday.

Technically, action so far this week has left a double-bottom support area in September coffee at $1.5685-$1.5705. While coffee futures could trade lower, Scoville sees downside potential limited given the tight supply situation.

"Everyone wants to get all bear-ed up, but there's no fundamental reason in ICE coffee to do that," he said.

ICE warehouse stocks fell 10,792 bags to total 2.182 million 60-kilogram bags, the exchange reported.

Total open interest on ICE fell 4,025 to total 165,787 lots. Just 188 contracts remained open in nearby July ahead of its July 20 expiration.

Futures volume is pegged at 18,602 contracts, with 6,726 calls and 3,662 put options traded.

ICE Change (cents) Range
July $1.6065 up 5.15 $1.5550-$1.6065
Sep $1.6305 up 5.40 $1.5705-$1.6395


(END) Dow Jones Newswires

07/07: Hencorp Commcor

Mercado de Café pela manhã: Nesta manha o mercado de café arábica em Nova Iorque trabalha cotado a 158,40 com 75 pontos de alta e range entre 157,65 e 159,75, base set/10.

Contrariando a acentuada tendência assistida na sessão de ontem, a cotação do café nesta manhã de quarta-feira vem trabalhando em ligeiro movimento de alta, porém ainda respeitando seu range de trabalhado.

Vale lembrar que nesta próxima sexta-feira se dá o vencimento das opções de agosto, o que deverá deixar o mercado, como de costume, um tanto mais volátil.

O mercado de café trabalha com suporte de 157,50 / 156,85 e resistência de 160,30/ 163,50. Na sessão de hoje desceu 1 canudo, totalizando no acumulado do período 551 canudos.

De acordo com a Cecafé, os embarques entre os dias 01 e 06 de julho somaram 120.848 sacas, uma variação negativa de 0,1% em relação ao mesmo período do mês anterior.

Coffee Slumps to Two-Week Low on Greater Output in Brazil; Cocoa Declines

Coffee prices in New York fell the most since November on speculation that global supplies will increase as production jumps in Brazil, the world’s largest grower. Cocoa also dropped.

Brazil’s coffee output may total 47 million bags this year, up 19 percent from a year earlier, as trees enter the higher- yielding phase of a two-year cycle, according to the Agriculture Ministry. No frost is forecast for coffee-growing areas through July 9, the government’s weather agency said on its website.

“Fundamentals are bearish,” said Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago. “The Brazilian crop is expected to be big, and there’s no news, like threat of freezing temperatures, to push prices up. Coffee has lost its upside momentum.”

Arabica coffee for September delivery fell 6.65 cents, or 4 percent, to $1.5765 a pound on ICE Futures U.S. in New York, the biggest loss for a most-active contract since Nov. 10. Earlier, the price reached $1.5685, the lowest level since June 18. Futures are down 11 percent since reaching a 12-year high on June 24.

On London’s Liffe exchange, robusta-coffee futures for September delivery dropped $60, or 3.5 percent, to $1,650 a metric ton, after touching $1,643, the lowest price since June 24.

Arabica coffee, a variety grown in Brazil and brewed by companies such as Starbucks Corp., may fall as low as $1.50 a pound by the end of the week, Cruel said.

Further Drop Predicted

Robusta beans, used mostly in instant coffee, are harvested mostly in Asia and parts of Africa. Each bag weighs 132 pounds, or 60 kilograms.

Arabica prices surged as much as 31 percent since the end of May to $1.765 on June 24. Robusta jumped as much as 34 percent in the same period.

“On the way up, there was a lot of panic buying and short- covering,” Angus Kerr, owner of trading company Coffee ag in Cobham, England, said by telephone, referring to purchases that closed bets on falling prices. “The market has further to come down before it consolidates.”

Cocoa for September delivery slipped $4, or 0.1 percent, to $2,967 a ton in New York. On London’s Liffe, cocoa futures for September delivery dropped 6 pounds, or 0.3 percent, to 2,394 pounds ($3,627) a ton.

To contact the reporters on this story: Yi Tian in New York at ytian8@bloomberg.net; M. Shankar in London at mshankar@bloomberg.net

06/07: Corrects 4% Lower As Funds Take Profits

NEW YORK (Dow Jones)--Coffee prices dropped 4% Tuesday as speculative fund traders took profits against a backdrop of bearish economic sentiment.

Nearby coffee for July delivery ended 6.80 cents, or 4%, lower at $1.5550 a pound on ICE Futures U.S., the lowest levels in 19 days. Most actively traded September coffee settled 6.65 cents, or 3%, lower at $1.5765.

Coffee prices corrected Tuesday after rallying nearly 25% in mid June. Short supplies of high-quality beans prompted gains which attracted the interest speculative traders, whose primary business is not in physical coffee. However, a lack of follow-through strength has led some investors to second-guess their positions in coffee by selling to avoid further losses.

Coffee got a running start in Tuesday's bearish session. While ICE trading was closed in observance of the July 4 holiday, NYSE Liffe robusta coffee futures fell 2%. Pre-set orders to sell, or stops, were triggered when ICE September coffee breeched $1.60.

"The coffee balloon may be ready to deflate," said Sterling Smith, a market analyst at Country Hedging in St. Paul, Minn.

The U.S. Department of Agriculture recently projected a record world coffee crop in the coming season. Production is pegged 6% higher than demand at 139.5 million 60-kilogram bags. The total crop from Brazil, the world's top producer, is seen at 55.3 million bags. Brazil is currently harvesting the crop. No sizeable fresh supplies of high-quality beans will be available until the late-fall harvest from Central America and Colombia. Supplies from those countries are short following two seasons of poor harvests amid unfavorable weather.

Brazilian coffee sellers may pressure the futures market if prices hold near current levels, said Rodrigo Costa, vice president of institutional sales at Newedge USA in New York.

Selling has been relatively light from Brazil at this point in their season. Much of Brazil's incoming bumper crop does not meet the quality standards of coffee traded on ICE.

Generally pessimistic market sentiment also dragged U.S. equities, the ollar and many commodities lower during the session. The most recent installment of disappointing economic data showed slower-than-expected U.S. service-sector growth in June.

Analysts said September coffee futures have support on technical charts near $1.5740 and $1.5750.

"As long as it's above [that level], we might consider [these losses] a correction from the higher move that we saw in June," Costa said.

ICE coffee warehouse stocks decreased by 7,487 60-kilogram bags Tuesday to total 2.193 million bags, according to exchange data.

ICE coffee open interest--the number of active positions left at the end of the session--increased by 2,649 lots Friday to total 169,812 lots, according to exchange data.

Volume was estimated at 21,217 lots, according to exchange data. In options, approximately 5,789 calls and 4,111 put options traded.

ICE Change Range Liffe Change
Jly $1.5550 -6.80c $1.5500-$1.6100 Jly $1,625 -$63
Sep $1.5765 -6.65c $1.5685-$1.6350 Sep $1,650 -$60


-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

07-06-10 1502ET

Copyright (c) 2010 Dow Jones & Company, Inc.

Coffee Declines on Speculation Prices Climbed Too High to Reflect Demand

By M. Shankar - Jul 6, 2010

Coffee fell in New York and London on speculation prices climbed too high in recent weeks to reflect the outlook for supply and demand.

Arabica futures for September delivery slid as much as 3.5 percent to the lowest price in two weeks on ICE Futures U.S. in New York. The beans jumped more than a quarter in the four weeks through June 25, as did the harsher robusta variety traded on the Liffe exchange in London.

“On the way up, there was a lot of panic buying and short- covering,” Angus Kerr, owner of trading company Coffee ag in Cobham, England, said by phone, referring to buying of beans to close bets on lower prices. “The market has further to come down before it consolidates,” he said.

September-delivery arabica declined 3.8 cents, or 2.3 percent, to $1.605 a pound on ICE Futures U.S. at 8:42 a.m. local time. Robusta for September delivery dropped 2.9 percent to $1,661 a metric ton on Liffe, rebounding from a slide of as much as 3.9 percent, the biggest retreat since Nov. 10.

Traders yesterday exchanged 500 lots of September $1,700 robusta call options on Liffe, according to data from the bourse. They also exchanged 725 lots of September $1,700 put options and 225 lots of $1,750 puts. Calls give the right to buy a commodity at a preset price, while puts confer the right to sell.

Raw sugar for October delivery rose 0.18 cent, or 1.1 percent, to 16.88 cents a pound in New York. White, or refined, sweetener for October delivery was little changed at $502.50 a ton on Liffe.

Cocoa for September delivery slipped $1 to $2,970 a ton in New York. The chocolate ingredient for September delivery dropped 0.1 percent to 2,397 pounds ($3,635) a ton on Liffe.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net

DJ MARKET TALK: ICE Coffee Slides To 11-Session Low; Funds Sell

1311 EDT [Dow Jones] - ICE arabica coffee futures are trading off of their lowest levels in nearly three weeks as speculative funds take profits.
Most-active Sep coffee is down 6.45 cents at $1.5785 a pound, off of the $1.57 intraday low. Funds are selling long positions after the market was unable to
push beyond 12-year highs hit June 24. The market is correcting as was expected, with technical support at $1.5540 and $1.5750, analysts say.
Fundamental factors are unchanged, though recent losses have sparked technical sales, one analyst notes. Liffe Sep robusta coffee settled $60 lower at $1,650
a ton. (HEH)