Arabica coffee futures rose Tuesday on technical buying linked to chart-based factors and on a friendly Brazilian crop report, though the day's strongest gains had been trimmed by the close. Most active May coffee added 165 points, or 1.3%, to settle at $1.3275 a pound on ICE Futures U.S. Nearby March, which has few open positions, rose 155 points, or 1.2%, to end at $1.3025 a pound. Despite the mostly sideways to weak trend of coffee futures recently, the market uncovered strong buying support at a triple-bottom area near $1.30, allowing prices to rally to two-week highs. Coffee even bucked an overall weak commodity trend to post gains. A projection detailing a smaller-than-expected Brazilian crop also sparked some gains. "I think part of this strength is due to a positive report on production that came out of the government of Brazil today, especially considering most people are carrying significantly larger production estimates," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago.Brazil's upcoming 2010 coffee crop is pegged at 46.4 million 60-kilogram bags, Brazil's Census Bureau, or IBGE, said Tuesday. This was down 0.8% from a January estimate, though the IBGE projection is often lower than industry estimates, a broker said. ICE coffee futures may have located a short-term bottom with the move higher, though it will need to be confirmed by additional gains, said Scoville. The rally in May coffee faltered as the contract scaled $1.34 a pound, where trendline resistance toughened. May hit a two-week peak of $1.3425 before backing off slightly on profit-taking. Still, bullish traders were happy to see the market rally given the bullish fundamentals of extremely tight arabica bean supplies, a factor that has been overshadowed recently by expectations for a large upcoming Brazilian crop that some say could total anywhere from 50 million up to 60 million bags. Brazil is the world's largest grower of arabica coffee and the upcoming harvest is greatly anticipated to help replenish global stocks after adverse weather had significantly cut South American, Central American and Mexican production. Costa Rica's coffee exports are down 5.6% for the 2009-10 crop year through Feb. 22, as uncertainty grows over how much coffee will be available due to adverse weather delaying and damaging the harvest. Honduran 2009-10 coffee output for the crop year through March 1 is up 28% compared to the same period last year. The rise isn't due to a bumper crop, but it does signal an unusually late start to last year's crop. ICE warehouse stocks fell 23,200 bags to total 2.730 million bags. Open interest increased 721 to total 124,341 contracts. Futures volume is estimated at 19,439 lots traded, with 4,297 calls and 1,951 put options traded. |
