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CSCE coffee heads back down in light transactions

NEW YORK: CSCE coffee futures fell back on Thursday in modest activity as speculators liquidated long positions which they had contracted over the last couple of sessions, traders and brokers said.

"The market is looking heavy and needs something to keep it up and the spec (speculator) is still fairly long and if he dumps, we're going to be at 110 (cents a lb) or even lower," one roaster said.

Key March arabicas closed down 1.75 cents at 116.85 cents a lb after trading 121.40-116.50 cents. The rest lost 1.80 cents with May closing at 119.35 cents after trading 123.70-119.50 cents.

Futures opened virtually unchanged as predicted, with some early buying taking prices to their intraday high, traders said.

But for the rest of the session it was a downwards path, as prices were hit initially by a speculative liquidation when operators shed their long positions from Wednesday's rally.

"I think that people reestablished their shorts that they took off of yesterday's rally, so trade reestablished new shorts in the market," one floor trader said.

After a period of calm trading, a second bout of speculative selling took prices down another notch to settle just above the day's lows.

"You had decent volume early, then nothing happened for a couple of hours and then in the last 15-20 minutes, everybody who had bought earlier just sold it off," one broker said.

The New York coffee market is nervously awaiting the release of private forecaster Leon Yallouz's outlook for Brazil's 2000/01 coffee crop.

Rumours have been circulating in the marketplace over the past few days that his estimate will be released to clients possibly on Friday or Saturday.

Analysts and traders contacted by Reuters on Wednesday are calling for him to put out similar to slightly higher numbers than the official Brazilian estimate of 28.90 million 60-kg bags.

They said the market was looking weaker at the moment, with technical indicators pointing to a move lower. "The 40-day moving average (MA) has crossed under the 10-day MA, so that's a bearish signal," said New York-based commodity analyst with Refco Inc., Anne Prendergast.

She added that the market is also ultimately going to have to take into account the ever-increasing number of CSCE certified warehouse stocks.

One institutional buyer said that certifieds were set to climb further, especially as Central American origins start to flood the market with more coffee.

"The dribs and drabs that you're seeing now are nothing in comparison to what the certifieds are going to do over the next six months. You could see (them) top two million bags by June," he said.

US certified stocks stood at 897,474 60-kg bags as of Jan 4 compared to 895,474 bags as of Jan 3.

Technicians said resistance in March stood at 122-123 cents, then 126 cents. Support was pegged at 115 cents, then 109-110 cents.

Volume reached an estimated 5,778 lots against the 7,716 lots previously. Call volume touched an estimated 2,976 lots whilst put volume was estimated at 3,088 lots.

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