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CSCE coffee closes lower as funds sell

NEW YORK: CSCE coffee futures settled lower on Friday, in a quiet pre-holiday session, having come under early pressure from speculators, coupled with fund selling later on, traders and brokers said. Active May KCK0 ended the day at 106.15 cents, 1.90 cents a lb off, moving in a trading range of 109-105.80 cents.

Spot March arabica which went into notice period on Friday, closed 1.05 lower at 104.30 cents, trading 106.40-103.75 cents a lb. Back months slipped back 2.10 cents. The New York coffee market will be closed on Monday in observance of Presidents Day. usiness will resume as normal on Tuesday.

Arabicas hit the day's highs shortly after the opening bell, but speculative and fund selling triggered stops underneath the market, as active May slid below support at 107 cents. "I think the locals tried to buy it up and ran into some light origin selling, quickly turned around and the March/May was tightening up.

But they ended up pushing May under some support levels, along with some fund selling," one senior trader said. Trade short covering lent the market some support, although prices kept to a very narrow range throughout most of the session. Investment funds are thought to now hold a net short position in the market, for the first time since October 1999.

"They should be net short, although it's hard to determine exactly how much. But they still have a large gross position long. We didn't see any fund liquidation per se, just new selling," the senior trader said. Non-commercials, or large funds, were shown holding a net long position of 5,633 lots as of Feb.8 in the last CFTC Commitments of Traders report.

The next bi-weekly report is due out in one week's time. Open interest in spot March decreased by 1,458 lots to 8,617 as of February 17, whilst it swelled to 29,152 lots, up 2,463 lots in active May delivery. World coffee producers agreed on Friday to examine a coffee retention programme in order to boost depressed world prices, the Association of Coffee Producing Countries (ACPC) said.

The ACPC secretariat will evaluate the programme and present its evaluation to a group of experts, including the ACPC's own technical group, for further consideration. US and UK traders have voiced their doubts over such plans, saying they were highly sceptical that any proposals by the ACPC would have the desired effect of raising prices.

Traders said support for May arabica stood at 104 cents, while resistance will likely be found at 110 cents, then 112 cents. Volume traded on Thursday reached an estimated 9,795 lots, against the previous official volume of 16,217 lots. Call volume reached an estimated 2,545 lots, whilst puts were seen at 640 lots. The CSCE is a subsidiary of the New York Board of Trade.-Reuters