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CSCE coffee tumbles, May closes under 100 cents

NEW YORK: CSCE coffee nearby months crumbled under a key psychological level to close lower on Friday as the market came under heavy pressure from speculative liquidation and fund selling, traders and brokers said.

"It was mainly speculative and fund selling and the market just couldn't lift it's head up due to a lack of buying," one floor dealer said.

Active May ended down 3.80 cents at 99.35 cents a lb after trading 103.30-98.40 cents, falling back under 100 cents for the first time since late October 1999.

Spot on March arabicas shed 2.95 cents to 98.80 cents, moving in a 102-98.20 range. Back months fell 3.40-3.90 cents.

Arabicas came under early pressure from origin and fund selling, with an absence of buying accelerating the downside trend, brokers said.

Trade selling the on March-May switch was also noted.

"Right now the market is under heavy pressure from speculative liquidation and funds possibly going short," Victor Henriquez, president of Miami-based Hencorp Becstone Futures said.

"There's great discontent among the longs and just a lot of people are throwing in the towel."

Coffee futures have been slowly eroding since the end of 1999, when Brazil's agriculture ministry pegged the country's 2000/01 crop production at 28.9 million 60-kg bags, above market expectations at that time.

Traders and brokers had been predicting a break through the psychological support level over the past week.

"There's no sign of life. At the moment there's no reason to buy it here. The roasters are just looking at that...and they're just letting it come down to them to buy it," Henriquez said.

Participants were waiting for on Friday's release of the latest CFTC Commitments of Traders report, which will be published after the market closes.

Some traders believe the funds will be showing a net short position, although others say that open interest as of on February 22 did not reflect that much of a drop and that they will still be net long.

But most of them agreed that after the liquidation over the past two days, funds would almost certainly be short at the present time.

Brazil's government is considering a minimum "trigger" price for coffee which could be imposed as part of a retention scheme to squeeze supply and support weak world prices, a leading producer said on Friday.

Several US traders have expressed surprise over Brazil's and Colombia's plans to possibly hold back coffee from the market as both countries are facing reduced production this year and next.

"I think they (retention plans) cause more harm than good. I don't understand why Brazil has to talk about this," Henriquez said.

The Association of Coffee Producing Countries (ACPC) will meet during the week of on March 20 to discuss the idea of a retention scheme for its 14 member nations, who are widely expected to follow the Brazil-proposed plan and implement strategies to stockpile coffee.

Traders said that support in CSCE May is pegged around 98 cents, while resistance will likely be found at 100 cents.

Volume was an estimated 14,496 lots against the previous official volume of 7,325 lots. Call volume reached an estimated 2,031 lots, whilst puts were seen at 1,371 lots.

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