DJ ICE Coffee Review: Lifted By Dollar, Lower Colombian Output

Arabica coffee closed higher Thursday with the help of a slightly softer U.S. dollar on a day that a report showed coffee output from Brazil fell last month. Most-active May coffee settled an even penny, or 0.75%, higher at $1.3375 pound on ICE Futures U.S.

Coffee is getting a continued technical bounce after it was “oversold” earlier in the month following a several-week slide since early January, plus recent coffee news has not put further pressure on the market. “There is not much news out that shows you really need to sell it,” said Jack Scoville, vice president with Price Futures Group. “In fact, yesterday the certified stocks were down again pretty hard.”

The data, released after Wednesday’s close, showed ICE-certified warehouse stocks were down 33,223 bags at 2,696,388 bags. “The Columbia data came out and production was down 25% against ideas it was starting to improve,” Scoville said. “So there is not a lot of news out there to keep driving the coffee price down. A lower dollar is probably supportive as well.”

Columbia coffee production in February, the fifth month of the 2009-10 crop cycle, fell 25.3% to 648,000 60-kilogram bags, the country’s National Federation of Coffee Growers said Thursday. This compares with 868,000 in February of a year ago. Colombia is the world’s largest producer of mild washed arabica coffee.

Around the time coffee was closing, the euro was up modestly to $1.3670 from $1.3653 late Wednesday, helped slightly by a shrinking U.S. trade deficit as imports sank more than expected. A softer dollar tends to help commodities by making them less expensive in other currencies.

May coffee continues to recover from a sell-off that carried the market from a Jan. 11 peak of $1.4870 to a Feb. 25 low of $1.2825. “The market is not oversold any longer,” said Spencer Patton, chief investment officer at Steel Vine Investments. “It has worked off that oversold condition by going sideways. It’s trading pretty technically right now.”

However, he said, the market now faces resistance around $1.3450 a pound, with more at $1.40, he says. Scoville put his support for May coffee around $1.32, then $1.3125. He pegged resistance at Tuesday’s $1.3425 high, then $1.3735.

Source : FutureSource