New York arabica coffee futures finished on Tuesday with healthy gains, lifted by trade and industry buying a day after the benchmark contract slid to lows last seen in early November, dealers said.
By Tuesday, sellers had run out of steam and buyers jumped back in the market, causing some players to cover short positions and provide an extra boost by session end.
"I think there were trade bids underneath the market. The market fell to new lows yesterday and there were some trade bids that had been building and came in today. As a result, the market found decent industry support," said one coffee dealer.
New York Board of Trade arabica coffee for September delivery ended with a 1.05 cent increase at 95.10 cents a lb. The contract briefly matched Monday's bottom at 93.95, its lowest level since early November, 2004, but was quickly whisked up to a session high at 95.50 a lb.
Other contracts settled from 0.50 to 1.05 cent higher, with two issues setting life-of-contract lows. After Monday's weak close, some players were looking for prices to continue breaking down on Tuesday. Instead, dealers said, tepid fund selling was met with pent up demand.
"They ran into buying. So, they started covering shorts, and it wasn't able to break to new lows," a trader said. In addition, he said, the volume of fund sales was light. "So, there wasn't much follow through to the downside and some of the shorts from late last week looked to cover." With fundamental factors having little impact of late, traders said technical factors still dominated the action.
US weather forecaster Meteorlogix said it continues to see favourable conditions for No 1 coffee grower Brazil's ongoing harvest. It said it expects dry conditions through Saturday, with light scattered showers on Sunday. Temperatures near to above normal were seen for the week, with no damaging cold. After Sunday's rains, temperatures may turn a little cooler early next week, the weather report said.
By late Tuesday, Sao Paulo coffee futures rose 0.63 to 0.80 percent. Elsewhere, the Nairobi Coffee Exchange (NCE) said coffee prices in Kenya rose on aggressive buying by exporters ahead of a month-long seasonal break that starts next month. The average price for Tuesday's auction was $103.15 per 50-kg bag compared with $88.99 at the previous sale.
The NCE added that volume was low, but so was quality which capped price gains. Only 4,917 60-kg bags were offered for sale compared with 8,721 bags at last week's sale. In Vietnam, the world's largest robusta producer, coffee trade slowed to a near halt in the past week due to a severe shortage of between-crop stocks traders said on Tuesday.