Arabica benchmark coffee futures closed lower on Thursday as gains to near seven-month highs gave way to origin sales and profit taking by funds, speculators and locals extended the decline, traders said.
"March hit the projected (upside) target at $1.2460 (per lb). We took that out at the open and then we saw profit-taking selling," said one coffee dealer.
The New York Board of Trade December arabica coffee contract was down 1.65 cents at $1.1650 a lb. At the open, it surged to $1.2020 a lb, its highest level since April 25 and finished near the session low of $1.1640 a lb.
March coffee futures ended 1.50 cent lower at $1.2095 a lb after shooting to $1.2475, a level last seen on April 21. Back-month futures lost 1.25 to 1.50 cents.
Brazilian producers returned from their one-day holiday to a market that had added substantial gains and then rallied further at the open.
They took advantage of the highs by selling some of their crop. Once selling picked up momentum more speculative players jumped in to grab profits.
"Origin selling we saw at the higher end of the range. Funds were actually on both sides of the market as buyers and sellers as buyers and later as sellers.
Then short-term specs sold the market late in the session, along with locals and day traders," a New York trader said. Traders also said much of the session's final volume was dominated by spread business as participants wanting to keep long coffee positions rolled December contracts into March futures.
Delivery notices for December coffee futures begin on November 20. One trader pointed out that the December-March spread traded from 430 out to 445 points by the end. NYBOT estimated on Thursday's final arabica volume at 27,156 lots, compared with Wednesday's 34,123-lot tally.
Looking to Friday, one trader said he expects more selling. "There's a potential for the market to be lower. London is due substantially lower. And since we (NYBOT coffee) hit the target high, a retracement back to $1.1880 (a lb) for March has great potential for Friday," the trader said. In top producer Brazil, US weather service Meteorlogix said on Thursday it forecast dry conditions or a few light showers through on Monday followed by scattered showers.
Brazil said on Thursday it will auction 40,000 60-kg bags of arabica coffee from government stocks for industry sectors on November 22, said federal Banco do Brasilia, which will manage the electronic sale. At the last auction on November 8, the government sold 100 per cent of the 30,000 bags offered. Official Brazilian coffee stocks stand at around 2.04 million bags.
Brazilian coffee producers sold 48 percent of an estimated 43.5 million 60-kg bag 2006/07 crop by October 31, down from 54 percent a year ago, private analysts Safaris e Merced said on Thursday. Colombian coffee exports rose to 1.0 million 60-kilogram bags in October from 751,000 bags in the same month of 2005, the Colombian Coffee Growers' Federation said on Thursday. London robusta coffee futures closed modestly higher lifted by speculative buying. January futures finished $6 higher at $1,562 a tonne in a $1,552 to $1,581 range.