Coffee Review: Falls On Fund Selling, Weak Technicals

Arabica coffee futures fell Thursday on fund selling linked to weak chart outlooks as a stronger U.S. dollar encouraged speculative sales in commodities. Most active May coffee on ICE fell 1.9 cents, or 1.4%, to settle at $1.3020 a pound. Nearby March, which has little open interest, lost 1.85 cents, or 1.4%, to end at $1.2785 a pound.

Despite razor thin world coffee stocks, traders seem to be focused on larger supplies due out of Brazil in the next couple of months for the declining prices. « We’re staring down the barrel at record production out of Brazil this year, and in the next 30 to 60 days, we’re going to get into that thing, and there’s no reason for coffee to rally, » said James Cordier, analyst and president of Liberty Trading Group in Tampa.

Brazilian cooperative Cooxupe estimates the 2010-11 Brazilian crop at 48 million to 50 million 60-kilogram bags, compared with expectations from the industry and market of a record 60 million bags or more. Cordier expects coffee output in Brazil to reach 53 million to 55 million bags.

Mark Julias, market strategist at Lind-Waldock in Chicago, sees value in coffee futures trading near $1.3000 a pound. While Brazilian production will no doubt rebound, he said a sizable portion of the crop may not be grade top-quality because of the heavy rains and lack of sunshine during the growing season.

Source : FutureSource