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CSCE coffee settles higher, ponders retention plan

NEW YORK: CSCE coffee futures ended higher on Wednesday as the market continued to consolidate after recent losses, whilst continuing talk about a possible coffee stock retention plan underpinned prices.

"In general we're still in a downtrend, with a little pause for now though, with all this retention talk. If anything it (talk) has eased up the Brazilian selling as the producers are waiting to see what the government's going to come up with," one senior New York-based trader said.

May arabica rose 1.50 to finish at 101.90 cents a lb, trading from 102.50-100.25 cents.

Spot March gained 1.25 to end at 101.15 cents. The rest of the board climbed by 1.10-1.55 cents.

Early attempts by locals to push arabicas through the upper end of its trading range failed as good resistance from trade selling knocked prices back, floor traders said.

"We traded up to 102.20 (basis May), but ran into heavy resistance. There was a lot of good selling up there," floor sources said.

Another attempt to break the 102.50-cent level saw the ring caught long, who reversed and attracted some light speculative selling, only to buy it back just on the close, floor traders said. "We rallied back up there at the end."

"Origin is still a seller, so every time we rally they're seen to be selling above the market. Roasters have been steadily buying on a downtrend for quite some time, so I don't think they're in any desperate need for product," one trader said.

Traders are closely monitoring ongoing talks about the Association of Coffee Producer's (ACPC) proposed retention plan. Members are to meet again during March in London.

Brazilian Agriculture Ministry spokesman Tito Matos de Souza said that the world's largest coffee producer was still considering the mechanisms of a retention plan, which would possibly include as much as five million 60-kg bags.

But the majority of Central American nations reject proposals to hold back coffee from oversupplied world markets, a Guatemala-based industry source said Wednesday.

The source, who asked not to be identified, told Reuters that producers were looking at alternatives for regulating supply, but ruled out retention or quotas.

In other news, Brazil's government expects to issue its updated forecast for the 2000/01 coffee crop later this month, but at a date yet to be determined, the Agriculture Ministry said.

Embrapa's last forecast pegged the crop at 28.90 million 60-kg bags, against 27.17 million in 1999/2000. The estimate was based on fieldwork conducted in November and December, which the government admits did not consider more drought-inspired losses from failed flowerings and January's heavy rains.

"There has been a great deal of market conjecture about this figure...The bottom line is that the market no longer seems concerned about the potential downturn in the Brazilian figure," softs analyst Arthur Stevenson said in his latest futures outlook report.

On a technical basis, May arabica should see support at the recent low of 98.40 cents, then 99 cents. Resistance would be at 104 and then onto 105 cents, where a lot of grower selling is believed to be waiting.

Volume traded reached an estimated 7,399 lots, against the official previous volume of 8,316 lots.

Call volume reached an estimated 1,165 lots, whilst puts were seen at 634 lots.

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