DJ ICE Coffee Review: Falls With Commodities

NEW YORK (Dow Jones)–Coffee prices tumbled to one-week lows Friday as broad-based commodities sales followed disappointing U.S. employment data that multiplied bearishness on euro-zone debt. 

Nearby coffee for July delivery ended 1.85 cent, or 1%, lower at $1.3375 a pound on ICE Futures U.S. The contract lost 0.4% this week. 

Coffee prices have trended higher for much of the last two weeks as cold temperatures put growing regions in Brazil–the world\’s top producer and exporter–at risk for frost damage. Though no frost is in the forecast, weather premium has entered the market as traders
take protection against a possible cut in the bumper crop expected from Brazil this season. Meteorologists expect cold conditions are to persist through mid-June.

Commodities including crude, metals and Chicago Board of Trade grains fell as the dollar sky-rocketed against the ailing euro. A strong dollar makes commodities more expensive in other currencies. The dollar rallied as the euro dropped on continued sovereign-debt concerns. At the same time, May U.S. payrolls data showed weaker-than-expected numbers, diminishing bullishness about the country\’s economic progress. Investors took the combination of news to mean the U.S. wouldn\’t be able to offset macroeconomic weakness in Europe. 
 
Along with outside pressure, traders also sold coffee to book profits Thursday as futures failed to push through the $1.38 level during the week, said Hernando de la Roche, managing director of Hencorp Becstone Futures in Miami. 

Coffee has occupied a tight $1.30-$1.40 range for most of 2010. The market has support from tight available cash supplies of high-quality washed coffee. At the same time, Brazil\’s biennially larger crop is expected to provide a buffer until the Latin American arabica harvest later this year.  

De la Roche said July coffee futures have support at the $1.31 level.  
ICE coffee open interest increased by 916 lots Thursday to total 137,148 lots, according to exchange data.  

Volume was estimated at 33,207 lots, according to exchange data. In options, approximately 6,474 calls and 5,593 put options traded on the floor. 
 
       ICE       Change     Range 
Jly    $1.3375   -1.85c   $1.3340-$1.3615 
Oct   $1.3530   -1.75c   $1.3495-$1.3765 
 
  -By Holly Henschen, Dow Jones Newswires; 212-416-2138; holly.henschen@dowjones.com