DJ ICE Coffee Review: Modest Gains On Fund Buying; Stuck In Range

Arabica coffee futures rose Monday on speculative fund buying, though a lackof fresh news and a mostly steady U.S. dollar ensured prices would remain stuck in recent ranges. Most active May coffee added 70 points, or 0.54%, to settle at $1.3110 a pound on ICE Futures U.S. Nearby March, which has few open positions, also rose 70 points, or 0.55%, to end at $1.2870 a pound.

Fund buying that boosted prices slightly in Friday’s session also helped lift the market on Monday, but traders are content to keep prices within the range bound by a high of $1.3330 and a low of $1.2825 on May coffee. Physical supplies of arabica beans continue to run extremely tight, though traders remain focused on a larger upcoming crop from top producer Brazil, preventing prices from rallying significantly.

Roasters have been willing to pay higher premiums, but are buying on an as-needed basis. « The industry prefers to pay premiums for what little fresh coffee there is available than to run and take delivery of the 2.7 million bags of bad quality coffee in the certified warehouses, » one Central American broker said.

Speculation continues to run in the market that Brazil may be sitting on a whopping 60 million bags for its upcoming coffee crop, though many others say it will likely be closer to 48 million or 50 million bags. Traders also wonder how much of the crop will grade top-quality after a growing season that saw excessive rain and a lack of sunshine.

For now, large speculative traders are content to sit on the sidelines before  jumping back into the market, after liquidating nearly half of their net long position. Funds were 2,037 contracts net long in the week to March 2, down from 5,544 net long the previous week, the latest disaggregated Commitments of Traders data showed.

Brazilian coffee growing regions saw from 0.50 inch to 2 inches of rain over the weekend. Mostly dry conditions with a possibility for a few light showers are forecast through the week, private forecaster DTN Meteorlogix said.

Source : FutureSource