New York coffee futures were called to open down 2.00 cents Tuesday, with the return of Brazilian producers prompting a retreat from yesterday's breathtaking advance, floor sources said. Many producers in top coffee grower Brazil were absent from trade Monday due to a national holiday, although dealers question whether producer selling will be enough to absorb another round of fund buying or short-covering. On Monday, NYBOT December arabica surged about 14 percent to settle at a new contract high of 91.65 cents a lb after trading from 80.25 to 95 cents.
On a continuation basis, the peak trade was the highest level for a front-month contract since July 2000.
March jumped 10.75 cents or almost 13 percent to settle at 94.55 cents and more distant futures rose 10.30 to 10.55 cents.
Monday's stellar trading volume of an estimated 37,106 lots on NYBOT was dominated by heavy options activity and contract switching between the two front months ahead of December's first notice day on Thursday.
Dealers attributed the dramatic price rise to a cocktail of factors, ranging from an earthquake in Colombia to declining US warehouse stocks to strong technical signals. And with Brazil on holiday Monday, few producers were in the market.
Little damage was reported from the Colombian quake in the world's second biggest grower of arabica, while a fall in green coffee stocks was not a big surprise, traders said.
"The question is do the fundamentals warrant a rally of this magnitude in a single session?" posed a Fimat analyst in an industry report.
Market players continue to question the state of top grower Brazil's harvest for the 2005/06 season.
Some analysts predict a smaller crop than the official estimate of about 38 million 60-kg bags for this year, largely due to a downturn in the South American country's biennial cycle.
Brazil is expected to release its final estimated 2004/05 harvest and its first estimate for the 2005/06 crop early in December.
On the weather front, Meteorlogix predicted scattered showers in Brazil's main coffee region through Thursday, which will help tree flowering and budding for next year's crop. It will be mostly dry from Saturday through Monday.