Arabica benchmark coffee futures ended with moderate losses on Monday after slipping to a one-week low on forecasts for more rain later this week in top grower Brazil's coffee region traders said.
New rains will follow heavy showers over the weekend that provided necessary moisture to Brazil's coffee trees and helped the flowering season progress. "I think most of it is weather related, the forecast in Brazil for rainfall later this week. Also, the typhoon (last week) didn't do much damage in Vietnam. So, I think both of those things are bearish right now and weighing on the coffee market," said Rohit Savant, CPM Group, commodities analyst.
The New York Board of Trade's arabica coffee contract for December delivery closed 0.85 cent lower at $1.0305 a lb in a $1.0275 to $1.0450 per lb trading range. March coffee futures also fell 0.85 cent to finish at $1.07 a lb. The rest ended with 0.40 to 0.95 cent losses.
Some players had built in long speculative positions based on recent dryness in the Brazilian coffee groves, some of which were unwound on Friday's wet forecast and were unloaded further on Monday as rainy forecasts continue, traders said.
Somar, private forecasters in Rio de Janeiro predicted a new cold front would bring more rain to Brazil's coffee areas on Thursday, after heavy rains hit over the weekend.
Harvesting of this year's crop was effectively completed by the end of September. But, regular rain is still needed for flowerings of the 2007/08 crop and growth of coffee cherries. Coffee trees normally flower between September and November, depending on rainfall patterns.
US weather service, Meteorlogix said on Monday it predicted dry conditions or just a few light showers through Wednesday with a return to showers and thunderstorms on Thursday and Friday. New York coffee futures started with healthy gains on Monday, but suddenly turned lower pulling London arabica prices down with it.
"There has been some talk of prices going much higher than they are currently with forecasts like $1.10 to $1.15 (a lb). But the market has pretty much been bearish on coffee for some time now and I don't see it," said Savant.
He added that coffee could get a boost as demand increases when the weather cools heading into late fall and winter. Otherwise, arabica fundamentals currently favour more selling. Investment bank Fortis said on Monday it expected world arabica coffee production to outstrip demand by just 250,000 bags 60-kg bags in 2006/07, sharply down from a surplus of 8.08 million in 2005/06. The NYBOT estimated final arabica volume at 10,640 lots, compared with Friday's tally of 7,172 lots.