20000211

CSCE coffee ends off, stages gradual erosion

NEW YORK: CSCE coffee futures closed lower again on Wednesday, although a late round of local short covering gave prices a boost after another session of fund and trade selling, traders and brokers said.

"It's just a slow degradation. I still think there's roaster buying going on, but then again, if it does go back up, the roasters are back out of it for a while," one Toronto-based roaster said.

Market talk continued to be dominated by the confusion caused by two differing crop estimates for Colombia's 1999/2000 harvest which were issued on Tuesday.

"Who cares who's right and who's wrong. You don't want to believe anybody. The market never belives them. Why should they, there's too much of a conflict of interest," the roaster said.

March arabica KCH0 dipped 0.85 cents to close at 107.70, trading 109.40-106.90 cents a lb. May KCK0 fell 0.75 to end the day at 110.50 cents, whilst back months lost between 0.45 and 0.70 cents.

After a predicted initial dip just after the opening bell on some follow-through selling, roaster buying and good buying of the March-May switch took arabica futures to the day's high, traders said.

But a renewed bout of fund selling, alongside trade selling for origin kept downward pressure intact, traders and brokers said.

Traders said that speculators were not necessarily liquidating their net long position in totality, with new short positions being taken out, as open interest had not fallen.

"I don't think the bulk of the spec (speculator) position is necessarily liquidating. You've still got some strong longs in there who are not tossing in the towel and you've got new shorts coming in," one roaster said.

Open interest as of February 8 stood at 51,771 lots, compared to 50,268 lots previously. "It's not been a liquidating market, it's been a market where guys are going short," one roaster said.

The last CFTC Commitments of Traders report showed non-commercials, or large investment funds, holding a net long position of 7,566 lots, with non-reportables 2,563 net long.

Technicians said support for March arabica was at 104.25cents, while resistance will likely be found at 114 cents, then 116 cents, followed by 118-120 cents.

Volume traded on Wednesday reached an estimated 12,306 lots, against the previous official volume of 17,889 lots. Call volume reached an estimated 3,255 lots, whilst puts were seen at 2,474 lots.

The nine-day relative strength index (RSI) of March coffee remained in oversold territory at 18 on Wednesday, compared to 21 at the close on Monday.

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