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CSCE coffee ends up on spec rally in front of 2000

NEW YORK: CSCE coffee futures finished the last trading of the century on Thursday on a strong note, as option-related activity spilled into futures to spark a speculative rally in front of the 2000 millennium rollover.

"There was one group which was very aggressive in the options pit. It washed over into futures and that sparked a speculative shortcovering rally," a broker said.

March arabica shot up 5.90 cents to close at 125.90 cents a lb, and near its intra-day peak of 126 cents. The session low stood at 119.25 cents.

On the year, the benchmark coffee price settled slightly higher compared with the close on Dec. 31, 1998 of 117.75 cents.

May gained 5.75 to 128.40 cents. Back months ran north between 5.80 and 5.25 cents.

The market eased to its low for the day before action flared in the option pit, brokers said.

"It looks like the option activity provided the spark," a broker said, adding this inspired speculative funds and locals to jump in as a result.

"I think the move down to the lows was overdone and we had some shortcovering as a result," another dealer said. "There was also no source selling to speak of and that got us up in a hurry."

Physical dealers said the market may have received some encouragement from talk that some European buyers may have to engage in some shortcovering after the 2000 New Year millennial celebration.

The arabica market will be shut on Friday for year 2000 festivities and will reopen on Monday, January 3.

In top grower Brazil, independent meteorologist Somar said Thursday that Brazil's coffee belt should receive a good soaking over the 2000 New Year weekend although the rains may tail off in some areas during the early part of next week.

Weather Services Corp. (WSC) said the outlook in Brazil is for increasing thundershower activity and into the weekend.

"Showers may linger in the region during Monday and Tuesday (and then) turn drier during Wednesday and Thursday," it said.

U.S. certified coffee stocks stood at 893,224 bags as of December 29, against 895,724 bags as of December 28. The number of bags pending grading was at 7,750.

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

Volume traded reached an estimated 5,489 lots against the 3,688 lots previously. The estimated call volume exceeded futures volume as it touched an estimated 5,730 lots. Put volume was estimated at 1,338 lots.

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