Speculative buying and the absence of firm selling made London coffee futures soar on Tuesday following a strong New York market and with players profiting from a weak dollar, dealers said.
The outlook was for a limited upside in the short term, as Vietnam escalates its selling ahead of the Tet lunar new year festivities on January 21-22, although the longer-term perspective seemed positive.
"There was a gap in the selling and prices just soared but heavy selling has flourished up again... I think it's been speculative buying and it's difficult to see any other reason for it at the moment," a dealer said.
"There is plenty of Vietnamese coffee to sell and they are just trying to measure the offers so they don't take the market down," the dealer added. Benchmark March ended $40 up, or 5.42 percent, at $778 on 15,068 lots out of total turnover of 20,791 lots.It moved in a $783-741 range, briefly rising more than six percent and hitting a level last seen in mid September on a continuation basis.
The front month also ended firmer, widening the premium in the front switch to around $27.
Dealers said support from industry would be limited despite the new record low of the dollar against the euro set on Tuesday as the industry was happy with its actual cover and the large stocks sitting in European warehouses.
The market found support from recent analyst forecasts about the possible end of an oversupplied market and a lower-than-initially-expected 2004/05 Brazilian crop.
A Brazilian crop above 45 million bags would imply lower prices, but below 38 million bags would open the way to a higher range. But the large stocks in the United States and Europe would weigh on prices.
"There is still plenty of coffee in Antwerp, for example, and most of the warehouses are packed with coffee. It's difficult to think of a sustained bull market with all that coffee around," a trader said.
Comments
Comments are closed.