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