DJ ICE Coffee Review: Dec Rallies 1.6% On Economic Optimism

December arabica coffee on ICE Futures U.S. rose Thursday, rebounding from a mixed early trade on renewed bullishness backed by surprising economic growth data and a weak U.S. dollar. Coffee futures for December delivery added 215 points to settle at $1.3675 a pound for a 1.6% rise on the day.

Most commodities, including coffee, rose after the U.S. Commerce Department reported that gross domestic product grew at a stronger-than-expected 3.5% annualized rate in the third quarter, versus pre-report expectations for 3.2% growth.

The increase was driven by a 3.4% rise in consumer spending, a turnaround from a 0.9% decline in the second quarter. It showed the U.S. consumer is alive and well, a development that’s expected to boost demand for physical commodities.

« Although the GDP headline report is subject to revision, this is certainly a step in the right direction, » said Sterling Smith, analyst at Country Hedging. The positive economic news pressured the dollar, boosted the stock market and encouraged traders to add riskier investments such as commodities to their portfolios, he said.

Global coffee production in 2009-10 is expected to outstrip consumption by 14.66 million, 60-kilogram bags, down slightly from a June estimate of 14.86 million, BNP Paribas Fortis Bank said Thursday.

The bank projects 2009-10 world coffee production at 143.2 million bags, up from 133.86 million bags.  While heavy rain in top arabica bean grower Brazil has been positive for tree flowering, problems will likely develop as a large amount of beans develop at differing levels once the harvest accelerates in 2010, Fortis said in a research note.

Analysts at Commerzbank expect arabica coffee futures to rise, but only marginally to around $1.50 a pound over the next year on expected greater supplies from Brazil, Colombia and Central America. The upcoming growing season will be the higher yielding of the biennial coffee cycle, they said. ICE warehouse stocks rose 1,352 bags to total 3.294 million 60-kilogram bags, the exchange reported.

Source : FutureSource