DJ ICE Coffee Review: Runs Past 2-Year High On Aggressive Buying

NEW YORK (Dow Jones)–Coffee prices rose to their highest levels in more than two years Friday as fund and roaster buying absorbed producer sales. 

Nearby coffee for July delivery ended 3.90 cent, or 2.5% higher, at $1.6025 a pound on ICE Futures U.S. 

Coffee prices have vaulted 20% in the last two weeks in a chain reaction that began with tight physical availability of the robusta coffee traded on NYSE\’s Euronext Liffe market in London. Talk that a major commodities company needed to buy its way out of positions tied to physical coffee on both sides of the Atlantic set the markets off. 

The sharp and sudden move attracted interest from speculators, like banks and hedge funds, who had previously had little interest in the range-bound market. Traders warn that futures could sell off as easily as they shot up, but selling associated with coffee producers
in Brazil was consumed by roasters and funds Friday. 

Brazil is aggressively selling its incoming crop, but enthusiastic buying is absorbing the pressure, a coffee trader in Central America said.

Meanwhile, new beans still aren\’t arriving fast enough from the harvest to quench buyers\’ thirst this week, traders in that country said. 

Brazil is the world\’s top coffee producer and exporter. Roughly half of production is of arabica beans. But only about 10% of that is thought to be the high-quality coffee on par with Colombia and Central American varieties. Those countries are typically the leading
sources of the so-called mild washed arabica beans, which are prepared for market to preserve flavor and quality. Poor harvests brought on by unfavorable weather has crimped production in those regions for the last two seasons. 

The strongest weekly close since the week of March 3, 2008, will attract funds interested in buying markets that show strong trends, said Hernando de la Roche, managing director at Hencorp Becstone Futures in Miami. 

ICE coffee warehouse stocks decreased by 1,500 60-kilogram bags Friday to total 2.25 million bags, according to exchange data.  

ICE coffee open interest–the number of active positions left at the end of the session– increased by 3,417 lots Thursday to total 156,797 lots, according to exchange data. 

Volume was estimated at 33,854 lots, according to exchange data. In options, approximately 7,215 calls and 7,421 put options traded on the floor. 
 
       ICE       Change     Range              Liffe     Change 
July    $1.6025   +3.90c   $1.5410-$1.6085      $1,543     + 3 
Sept   $1.6210   +4.30c   $1.5540-$1.6305      $1,571    +20 
 
         -By Holly Henschen, Dow Jones Newswires