ICE arabica coffee trading in the pit finished sharply higher at an 8-1/2-month high on Monday, on fund short covering and new buying unmatched by origin selling, traders said.
"With the market going higher, (funds) were forced to cover their positions and because of the forecast of no rains in Brazil until the end of the month, we don't see much selling around," said Rodrigo Costa, vice president of institutional sales for Fimat (USA) United State of American in New York. The rally-triggered buy-stops at the technical level $1.26 for the key December contract, attracting new buying by funds and other participants.
Volume was heavy. The ICE open-outcry benchmark December surged 5.7 percent or 6.90 cents to settle at $1.2780 per lb., the highest closing price for the second month since January 4. The trading range spanned $1.2475 to $1.28. The rest closed in a range from 5.15 to 6.95 cents higher.
On the screen, December coffee was up 5.8 percent or 7.00 cents at $1.2790 a lb. by 2:23 pm EDT (1823 GMT), in a wide trading band from $1.2080 to $1.2815. September typically experiences dry conditions while rain usually arrives in October, when it enables coffee trees to bloom.
If rain does not fall on the coffee-growing regions of Brazil in the second half of October, there could be damage to the crop, Costa said. Now, DTN Meteorlogix said top coffee producer Brazil would see mainly dry conditions with above-normal temperatures through on Friday.
Looking ahead to Tuesday, resistance for the December contract was pegged at $1.30 with initial support at $1.26. In London, robusta coffee futures rose to a nine-year high as a squeeze based around tight supplies ahead of the next harvest in top producer Vietnam pushed up prices by almost 4 percent.
The Liffe November contract closed up more than 2 percent, or $45 at $1,985 per tonne, moving from $1,950 to $2,026, a fresh contract high for the second straight day. ICE estimated final open-outcry coffee volume at 5,319 lots, with traders pegging electronic volume at a heavy 43,000 around 1:10 pm.
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