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CSCE coffee ends down as origin sales erode prices

NEW YORK: CSCE coffee futures closed slightly down on Tuesday, as prices gradually dribbled lower when producer selling put a halt to an earlier speculative short covering rally, traders said.

"Short covering by short-term specs (speculators) rallied the market and a lack of selling helped it..but it got capped by some origin selling-some new selling showing up there-and then it just eroded away," one floor broker said .

Key March arabica edged down 0.25 cent to finish at 116.25 cents a lb, trading between 120.50-115.75 cents. The rest of the board lost 0.35 cent, with second-month May closing at 119.15 cents.

After a sharp fall the previous session, arabica futures staged a moderate recovery in morning activities when a small shortcovering rally, spurred by trade and fund buying took prices to their intraday highs, traders said.

"It's a funny market. Good interest underneath, selling overhead. It looks like trade on the buy side and some fund buying and producer selling up top. It's a very mixed picture," a broker said.

Judith Ganes, tropical softs analyst with New York brokerage house Merrill Lynch said on Tuesday that prices should hold for now. "I think it (price) represents a fairly good value here," she added.

Heavy rains over the New Year's weekend doused Brazil's coffee growing areas and are forecast to continue for the next few days until a stubborn cold front finally heads south, meteorologists Somar said on Tuesday.

Weather Services Corp. (WSC) predicted daily episodes of scattered to widely scattered showers and thunderstorms during the next five days, with temperatures trending warmer.

Brazilian farmers said that while more losses may now be avoided after several months of uneven and scant rains, the worst drought damage had already been done.

"It's raining well but it doesn't make any difference because the flowering had already 'taken'," said Marcelo Emoura, agronomist at the Cooparaiso co-operative in Sao Sebastiao do Paraiso in southwestern Minas Gerais.

Technicians said resistance in March arabica stood at the recent peak of 126 cents. Support was pegged at 114 cents.

Volume traded reached an estimated 7,183 lots against the 8,132 lots previously. Call volume touched an estimated 2,552 lots whilst put volume was estimated at 1,179 lots.

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