DJ ICE Coffee Review: Rises On Tight Supply Forecasts

ICE Futures U.S. arabica coffee rose Thursday as fund buying keyed on momentum tied to bullish supply outlooks.

Most-active March coffee settled up 95 points at $1.4465 a pound and the nearby December contract also settled 95 points higher at $1.4415.

Coffee futures have risen nearly 9% since mid-October on mounting ideas of tightening world supplies. Bullish undertones sprout from projections for a lower crop from Colombia, poor quality available from Brazil and a late harvest in Central America, analysts said. Brazil is the leading world coffee producer and Colombia is No. 3 behind Vietnam.

“We do have tight supplies, but [the market] is dependent on fund buying to keep things moving,” said Sterling Smith, market analyst at Country Hedging in St. Paul, Minn.

Although there are some producer sales at recent highs, “the fund buying is overpowering the [effect of] selling,” said a Tampa-based coffee broker/analyst.

Speculative funds, which have no use for the underlying commodity, are looking at outside economic indicators, such as the U.S. dollar and economic data, for trading cues.

Fund traders will be looking at Friday’s release of November U.S. employment data, the broker/analyst said. The data is due at 8:30 a.m. EST. March futures could slide back to the $1.41 level if end-of-the-week profit taking comes into play Friday, Smith said.

“It would not surprise me to see the some money being taken off of the table ahead of the weekend,” Smith said.

Liffe March robusta coffee futures settled up $10 at $1,383 a ton.

ICE coffee warehouse stocks increased by 4,961 60-kilogram bags Thursday to total 3.183 million bags, according to exchange data.

ICE coffee open interest increased by 1,761 lots Wednesday to total 113,950 lots, according to exchange data.

Volume was estimated at 13,298 lots, according to exchange data. In options, approximately 5,376 calls and 1,503 put options traded.