CSCE coffee futures retreated on Wednesday on producer and speculative selling as origins took advantage of better prices for their beans and short-term traders nailed down profits, said analysts and brokers.
"Coffee has had a big upside run. With the real weakening and the internal coffee market in Brazil busy on Tuesday, it is no surprise to see producer selling today," said one commission house broker.
"Roasters have missed the move and a pullback would give them a chance to buy," he added.
Brazil's currency weakened further on Wednesday after falling nearly 1 percent on Tuesday after the Central Bank intervened twice to buy dollars.
The real is fetching 2.902 per greenback. The key March arabica future lost 1.90 cents to close at 76.75 cents per lb on Wednesday, with a 76.25 to 78.55 cents trading range.
On Tuesday the contract reached 79.20 cents, a level not seen since January 24, 2003. Some technical analysts note prices are testing 39-month levels not seen since the end of October 2000 only on a spot continuation chart.
May coffee declined 1.75 cents to 78.55 cents while the back months ended lower by 1.20 to 1.65 cents. Prices have grinding higher during December and January on a growing perception of tightness due to reduced exports by producers like Brazil and Colombia, late crops in Central American, and consumer stocks of coffee being drawn down.
Traders also appear to be quietly lowering their ideas that the coming 2004/05-coffee crop from top producer Brazil could be lower than originally thought.
On the fundamental front Guatemalan coffee production is seen coming in at 3.45 million 60-kg bags in the 2003/04 harvest, slightly under year-ago figures as maintenance dropped and amid lower yields.
Futures volume improved to 19,425 lots on Wednesday from the 18,003 lots exchanged on Tuesday.
Open interest rose 1,910 contracts to 107,004 lots on Tuesday, another new record breaking the prior peak of 105,094 contracts set on Monday.
Technicians said 79.20 cents and 80 cents were resistance levels for March. Support was seen at 76.25-75.90 cents. CSCE is a subsidiary of the New York Board of Trade.
Comments
Comments are closed.