DJ ICE Coffee Review: Slips On Mild Retreat From Highs

Arabica coffee futures for September delivery posted modest losses on chart-based selling as prices retreated slightly from the recent rally. Nearby September coffee lost 0.40 cent, or 0.24%, to settle at $1.6560 a pound on ICE Futures U.S. in New York. September rallied 3% Friday, buoyed by tight supplies.

Futures were held to a sideways trading pattern and narrow ranges amid a quiet news front, an analyst said. \”The market kind of chugged sideways with Europe just starting their summer vacation season with no real weather concerns coming from South America,\” said Sterling Smith, analyst at Country Hedging in St. Paul, Minn.

The Brazilian coffee harvest continues to progress, with 58% of the crop picked as of July 21, aided by mostly dry weather, agricultural consultancy Safras & Mercado said. This is up from 53% harvested in the comparable year-ago period.

Producers harvested 23.9 million bags of arabica beans out of an expected total crop of 41.5 million, Safras said. Robusta coffee, which is often blended with other beans, comprises the remainder of the crop.

The Brazilian harvest has also been sped along by high prices that spurred farmers to take advantage of the premiums. Safras pegs the total 2010-11 Brazilian crop at 54.6 million bags.
Coffee futures continue to find support from ongoing tight arabica supplies and strong demand for quality coffee. Adverse weather hurt the Central American and Colombian coffee crops last year, exerting heavy pessure on supplies of top-quality coffee. Those crops are expected to rebound this year, but supplies will remain tight until their harvests begin in the fall, brokers have said.

ICE futures have established a higher trading range with arabica supplies remaining tight, with $1.55 representing cheap coffee and $1.75 being the high end of the range, said Smith.

The Vietnamese government estimates that coffee exports in July will rise 70% from year-ago levels to 1.5 million 60-kilogram bags. So far in the crop year that began Oct. 1, Vietnam has exported 17.08 million bags of coffee.

Total open interest on ICE rose 3,085 to 172,013 lots.
Volume is pegged at 21,477 lots traded, with 3,753 calls and 3,209 put options traded.
ICE Change (cents) Range
Sep $1.6560 dn 0.40 $1.6425-$1.6720
Dec $1.6655 dn 0.15 $1.6500-$1.6800
-By Tom Sellen, Dow Jones Newswires; 913-322-5177; tom.sellen@dowjones.com