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CSCE coffee ends up on late local short covering

NEW YORK: CSCE coffee futures closed slightly higher on Thursday, when a local-led short covering rally took prices to the day's highs, with intense switch activity dominating transactions, traders and brokers said.

March arabica rose 1.05 cents to close at 108.75, trading 109-107.30 cents a lb. May gained 1.10 to end the day at 111.60 cents, whilst back months added on 1.00 to 2.15 cents.

Traders and brokers said arabica futures opened up stronger than predicted on local buying, with very light origin selling causing a slow erosion throughout the morning.

"It was a switch day today. The range was pretty small until just before the end when we had a late round of covering, with a very firm close," one Miami-based broker said.

Open interest in spot March decreased by 804 lots to 20,152 lots as of February 9, whilst it rose by 933 to 19,653 lots in second month May.

Front month March enters its month long notice day on February 18.

Traders and roasters said they were not surprised by declines in coffee retail prices, announced by two leading U.S. coffee retailers.

Philip Morris said late on Wednesday that it was reducing the price of its regular Maxwell House coffee brand by 15 cents as of March 20.

Following suit, Procter & Gamble said Thursday that its coffee unit Folgers would be lowering its price by the same amount, but effective March 13.

"It was due. Certainly the robustas which they both use heavily have been very cheap, so it's time to pass some of the savings back to the consumer," one roaster said.

In other news, a former government official raised new doubts about Colombia's crop forecast for the 1999/2000 coffee year Thursday by saying it would total less than 8.0 million (60-kg) bags.

Gilberton Arango London, a two-time former agriculture minister and ex-president of the private National Association of Coffee Exporters, gave his estimate in an opinion column in Portafolio, a leading financial newspaper.

He pegged the total 1999/2000 crop at 7.9 million bags, against the National Coffee Growers' Federation forecast of 8.7-9 million bags and 9.5 million estimated by Finance Minister Juan Camilo Restrepo on Tuesday.

Technicians said support for March arabica remained at 104.25 cents, while resistance will likely be found at 114 cents, then 116 cents, followed by 118-120 cents.

Volume traded on Thursday reached an estimated 9,741 lots, against the previous official volume of 12,451 lots. Call volume reached an estimated 2,300 lots, whilst puts were seen at 1,170 lots.

The nine-day relative strength index (RSI) of March coffee stood at 32 on Thursday, compared to 18 at the close on Monday.

Technicians normally believe an RSI reading of 30 or less is an indication that the market is oversold, while 70 or more is usually a sign it is overbought on a short-term basis.

The CSCE is a subsidiary of the New York Board of Trade.-Reuters