DJ ICE Coffee Review: Stronger US Dollar Puts Lid On Gains

U.S. arabica coffee futures closed modestly higher, but strength in the U.S. dollar limited the gains. Most-active March coffee on the ICE Futures U.S. exchange closed up 35 points at $1.4560 a pound. May coffee closed up 30 points at $1.4725.

The market saw larger gains earlier in the session when the U.S. dollar was under some selling pressure. However, when the greenback started to gain some strength, coffee futures dropped to the session low. « The market is consolidating and you will see quieter holiday trading this week, » said Sterling Smith, market analyst at Country Hedging. He add a major winter storm that socked the northeastern U.S. over the weekend kept many traders away from the market Monday.

« We are rangebound and there is no major fresh fundamental news in the market, » said Smith. Coffee futures prices have recently found buying support from expectations for lower coffee production from the ongoing harvests in most of Latin America, analysts said.

The U.S. Department of Agriculture on Friday cut its forecast for world coffee production in the current 2009-10 crop cycle by 2.2 million 60-kilogram bags to total output of 125.2 million bags. In its latest world coffee market report, the USDA’s Foreign Agricultural Service also said it had cut production in the last 2008-2009 crop cycle by 4.7 million bags to 130 million bags.

This takes the total cut by the USDA in current world coffee supply from fresh crops available to 6.9 million bags. This is in addition to a draw-down in world stocks in the last 12 months of a total of 6.3 million bags. Technical resistance for March coffee is located at $1.4800 and technical support at $1.4550, said Smith.

In London, Liffe robusta coffee futures traded slightly higher with light origin selling keeping downward pressure on the market. « Robustas are pretty quiet with the weight of origin on the market, » said a London-based broker. « Every day there’s got to be some [Vietnamese coffee] being hedged, » said the broker.

Source : FutureSource