Arabica coffee futures raced up to their highest levels in more then six months on Thursday and closed near those peaks as options-related fund and speculative buying set off automatic buy orders, traders said.
"It was more fund and speculative buying triggering stop-loss (buy) orders. And there's options expiration tomorrow. I think today there were a lot of people getting stopped out because of that," said Rodrigo Courier ad Costa, an analyst at FIMAT in New York.
December coffee options expire on Friday and traders said a number of call options remained outstanding at $1.20 per lb. that would need to be covered if they are called. The New York Board of Trade December arabica coffee contract finished with strong gains of more than 3 percent at $1.1920 a lb., up 3.45 cents.
Just before the close, the contract shot to its highest level since May 3 at $1.1940. March coffee futures also jumped 3.45 cents to settle at $1.2330 a lb.
The rest soared from 3.25 to 3.45 cents by the close, with 2008 contracts setting new lifetime highs. NYBOT estimated on Thursday's final volume at hefty 34,924 lots, almost matching on Wednesday's heavy 35,140 count.
Despite the lofty coffee prices, traders said origin continues to hold back in selling their beans. "We haven't had much origin selling either, which helps the market to go up.
There has been some, but we have not seen selling from origin," said ad Costa. As a result, funds and speculators have been free to continue buying unimpeded, which in turn has been setting off automatic buy orders. "There is nothing really strong on the fundamental side, besides the rumours that the Brazilian flowerings seem to be poor," a dealer said.
On Wednesday, official Brazilian warnings that next year's crop may suffer from poor flowerings, at a time when its coffee stocks are already at record lows, sent prices soaring. But traders said even those comments were just talk until further proof is demonstrated.
"The proof of that is that the buying that we've seen is more related to funds than anyone else. You would imagine that, if there is a big problem in a big crop, the major buyers would be roasters and not just funds," a broker said.
Brazilian coffee traders said a sharp rise in world futures prices this week had fuelled roaster demand, but producers expected the bullish trend to continue and were in no rush to sell, traders said.
Comments by senior Brazilian agriculture ministry official Linneu ad Costa Lima that an amber warning light was flashing for 2007/08 (July/June) supplies, helped push prices higher on Wednesday, with slipover buying on Thursday.
He told a seminar in Sao Paulo that official stocks were at record lows and that the flowering of the next crop had been unsatisfactory and output would be low.
As a result, one Brazilian broker said he thought producers would probably hold off selling in volume until January, when they expected arabica prices would climb. London dealers said they spotted some roaster buying, especially in the May contract. London robusta coffee futures closed with healthy gains on Thursday, after setting a fresh 7-1/2-year peak, as speculators and funds bought. January ended $30 higher at $1,638 a tonne.
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