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CSCE coffee ends down in technical fallback

NEW YORK: CSCE coffee futures settled lower again on Tuesday, as speculative funds sold in what was mainly a technical erosion, traders and brokers said

"It was slow today. It looks like basically the specs," one senior trader said.

He added that although participants were closely monitoring the outcome of Tuesday's meeting between coffee giants, Brazil and Colombia, "the market has already rallied in anticipation of some sort of scheme".

"Even if something does come out of it, the thought is that the market would just come off again. If the (Brazilian) government tries to back out...it'll just come off harder."

May arabica shed 3.65 to close at 102.75 cents a lb, trading 107.50-102.30 cents. Spot March came off 3.45 to 102.55 cents.

July fell 3.25 to 105.75 cents whilst the rest was down by 3.45-3.50.

Morning activities in arabicas was again dominated by locals, with trade selling exerting pressure on the market underneath 105.70 cents (basis May), floor traders said.

Speculative selling pushed it down to test support at 102.50, filling a gap between 103 and 102.50 cents, "but on a settlement basis we didn't close below (support)," the senior trader said.

Market operators are also waiting for Wednesday's publication of the Green Coffee Association's monthly warehouse stock figures.

Most traders contacted by Reuters said they expected an increase of between 350,000 and 400,000 bags in February, with the majority opting for the higher end of the range.

"I think the market sell off was a result of the people who don't understand that the number of bags is already taken into consideration and I think the usual routine will happen," one senior institutional buyer said.

"Sell the rumour, buy the confirmation this time."

The market shrugged off news that Colombia's cumulative coffee production fell from October to February, compared to the year earlier period.

Coffee stocks have also been severely drained by a slump in the harvest, coupled with export commitments roughly the same as in the 1998/99 cycle.

Stocks at the end of February stood at 2.2 million bags, down 47.6 percent from the same time last year.

On a technical basis, traders said May arabica should see support at 102.50, then 100.25-100 cents, followed by 99 cents. Resistance would be at 110, then the recent peak of 110.25 cents.

Volume traded reached an estimated 9,502 lots, against the official previous volume of 4,387 lots.

Call volume reached an estimated 2,033 lots, whilst puts were seen at 1,645 lots.

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