Benchmark arabica coffee futures rose 1 percent to a 1-week high on Thursday, fuelled by speculators buying back some of their short positions amid friendly signals on the price charts, traders said.
The New York Board of Trade's active coffee contract for July delivery climbed 1.0 cent to settle at 99.95 cents per lb, the loftiest since May 23, after trading from 98.25 cents to $1.03. September arabica advanced 0.95 cent to $1.0285 and the back months finished up 0.95 to 1.45 cents.
"It was just a little short-covering correction," said a trader at a large coffee trade house. "Origin was selling all day today," he said, adding, "the way we finished was definitely encouraging."
Still, coffee roasters were not chasing market prices on the way up, indicating the industry has adequate coffee supplies for the near term, traders and buyers said.
This week, the July contract slumped to an 8-month low of 97.10 cents, which were about 25 percent below this year's peak of $1.3030.
With government officials in top coffee producer Brazil expecting the country's 2006/07 (July/June) crop to rise 23 percent more than the previous season, non-commercial players have been reluctant to go long.
"All the selling was new shorts instead of long liquidation and an improvement in the technical picture could quickly call funds to cover their shorts provoking a quick spike," Rodrigo Costa, a vice president at Fimat USA, said in a market commentary.
"Brazil is harvesting the second biggest crop in history, meaning any price rally will find producer selling," he said, adding, "Selling from Brazil will probably be seen for the next three to four months."
On the price charts, traders pegged key support in July coffee at 98.25 cents, with resistance at $1.0175.
Trading volume amounted to an estimated 21,104 lots, down slightly from the 24,817 contracts officially tallied for the previous session.
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