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CSCE coffee ends firmer, specs test upper limit

NEW YORK: CSCE coffee futures edged marginally higher again on Wednesday, settling in the lower half of the day's range due to a lack of follow through to early speculative buying, traders and brokers said.

"There was some speculative buying from yesterday that continued this morning and made for a pretty nice rally in New York and then all of a sudden it just died," one broker said.

March arabicas finished 0.60 cent higher at 112.25 cents a lb after trading 114.25-111.75 cents. May gained 0.45 to 114.95 cents while the rest added 0.50 cent.

Speculators and locals continued to dominate market activities, looking to take out buy stops above the market, having failed to trigger rumoured sell stops under 109.50.

"You saw some good spec (speculative) buying on the opening. There is still some good switch activity, it's mostly trade active there buying March/May," a Miami-based broker said.

"I think they were really trying to push it up and see what kind of stops they could run up there," another broker said.

But after running into some light stops around 113.50 cents (March basis), the buying fizzled and locals spent most of the day getting out of their long positions, traders said.

In fundamental news, Brazil's chief coffee growers plan to request that government agronomists carry out an early update of the official crop forecast as the initial figure is inaccurate, key industry sources said on Wednesday.

The government's agricultural research agency Embrapa pegged the 2000/01 crop at 28.90 million 60-kg bags, against 27.17 in 1999/2000.

But so far, there was no formal decision to carry out work to issue any early crop update, they said.

"We've been hearing that for a while, but we don't know what effect it would have anyway," one broker said.

Market talk was also circulating about a rumoured increase in Columbia's quality premium. "We're hearing they're going to change the pricing," the broker said.

"Unfortunately they're only going to hurt themselves. Central America still has a lot of good quality coffee that they want to market, Europeans in the past have shown a willingness to switch from Colombians to Central Americans and there's no reason to imagine why they wouldn't right now."

Technicians said support for March arabica was around 109.50 cents, while resistance will likely be found at 116 cents, then 118-120 cents.

Volume was an estimated 7,399 lots, against the previous official volume of 8,968 lots. Call volume reached an estimated 2,052 lots, whilst puts were seen at 1,127 lots.

The nine-day relative strength index (RSI) of March coffee stood at 42 at the close on Wednesday, against 36 previously.

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.-Reuters