US coffee futures slid about 6 percent to a 10-month low on Wednesday after speculators and funds unloaded their long positions on upbeat supply news from hurricane-hit New Orleans, market sources said.
The market since on Tuesday has given back virtually all of its gains from last week amid reports that nearly half of the 1.6 million 60-kg bags of unfrosted coffee in New Orleans escaped Hurricane Katrina unscathed.
The New York Board of Trade's active arabica contract for December delivery tumbled 6 cents to 94.75 cents a lb., the lowest settlement since November 12 when it ended at 91.
Last week, market worries about damage to beans warehoused in the Big Easy, home to nearly a third of the nation's supply of unfrosted beans, had fuelled an 11 percent rise in benchmark arabica futures prices to a peak trade of $1.0550 a lb.
"We are seeing the market take back that premium," said Boyd Cruel, senior softies analyst at Alaron Trading. "We are getting some roaster buying supporting the market but it's light.
More than anything its just long liquidation right now, especially when we went below a buck," he added. The port of New Orleans, the second biggest port for exchange-licensed coffee behind New York, is set to resume commercial operations to load and unload vessels as on Friday, its director of operations Paul Zimmermann said on Wednesday.
"We will resume commercial operations as on Friday," Zimmermann told Reuters, adding he was expecting increased imports of lumber at the port to be used in the reconstruction of houses destroyed by Quatrain.
Two out of 10 coffee warehouses owned by Dupe Storage & Forwarding Corp were in good condition despite severe damage elsewhere in hurricane-ravaged city, a company spokesman said.
"There is a lot of destruction in the city, but so far the warehouses that we have inspected are fine," said Kevin Colley, speaking on behalf of Allen Colley, the company's president.
"We've only hit two out of 10, and we are making our way through now," he said, adding, "we are really not even supposed to be here." Dupe Storage & Forwarding Corp.
Warehouses hold in total about 300,000 bags of unfrosted coffee beans.
Colley hoped they could check the other warehouses by day's end. Police threatened to force reluctant Hurricane Quatrain survivors to leave the ravaged city on Wednesday.
But some warehouse owners have been taking big risks to assess the damage to their stocks. "I have personally checked my nearly 700,000 bags of coffee in my six coffee warehouses, and there was no flooding in any of the buildings," Kevin Kelly of Port Cargo Service Inc, an exchange licensed warehouse, told Reuters on Tuesday.
Jackson & Son Inc, another exchange licensed warehouse, was not immediately available for comment. Meanwhile, roasters and coffee importers based in New Orleans were trying to relocate their operations in other cities or states.
"Those who can are doing it," said one buyer of speciality coffee in the South. Still, some market sources question whether the quality of the coffee in New Orleans will be the same, even if the warehouses were in good condition.
"Coffee has a tendency to pick up aromas and orders," said a coffee broker based in the Midwest. "Most guys I've heard from say, 'I don't want that coffee I wouldn't take it if was offered to me,'" he said, pointing out that any roaster would first want to have the beans examined for quality. "I don't see any of it being available for roasters in a good while," he added.
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