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CSCE coffee ends off on fund sales in dull trade

NEW YORK: CSCE coffee futures finished on an easier note Monday in an uneventful session whose main feature came from an early bout of fund selling.

May arabica sank 3.10 to end at 103.25 cents a lb, trading 105.50-102.50 cents. July lost 2.85 to 106 cents whilst the rest came off by 2.80-3.20 cents.

An early flurry of fund selling dragged the benchmark May arabica contract down to support where it bounced from light trade buying, floor dealers said.

"Once the funds were done, that's all she wrote," the research director of an investment house in New York said. "Not much happened after that."

A broker for another investment body said that after fund sales were partially offset by scale-down trade support, futures meandered through the day in uninspired dealings.

A disruption caused by a computer glitch had no impact on the market, dealers said.

Traders said that while talk of a retention plan may have given bean prices some support, most believe such a scheme will not be effective in shoring up sagging coffee prices.

Salomon Smith Barney analyst Walter Spilka said export quotas by the Association of Coffee Producing Countries (ACPC) "have been tried before without a lot of success."

"One reason is that a number of large exporters like Vietnam are not members of the ACPC. A second problem is that many producer/exporter countries are not wealthy enough to store large amounts of coffee for any length of time," said Spilka.

"As a result, it is not expected that any retention scheme will be very effective in raising coffee prices," he added.

Salomon is a unit of financial giant Citigroup <C.N>.

Brazil and Colombia, the two biggest coffee producers in the world accounting for over 40 percent of global supply, have agreed a coordinated retention of up to 6.0 million 60-kg bags would be ideal for the 2000/01 crop year.

The ACPC is to meet in London early in April in hopes of reaching final agreement on implementing the retention plan.

"It's simply unworkable. The producers don't have enough money to finance the warehousing of coffee and other major origins like Indonesia and Vietnam will probably not go along with the plan," a broker said.

On a technical basis, traders said May arabica should see support at the session low of 102.50, then 101.25, followed by 100 cents. Resistance would be at 110, then the recent peak of 110.25 cents.

Volume traded reached an estimated 6,279 lots, against the official previous volume of 5,895 lots.

Call volume reached an estimated 1,665 lots, whilst puts were seen at 639 lots.

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