DOW JONES NEWSWIRES
Arabica coffee futures fell Friday, pressured by selling in nearly all commodity markets and choppy trading on Wall Street.
Nearby December coffee lost 320 points, or 2.3%, to settle at $1.3890 a pound, near the day's low of $1.3810. For the week ended Friday, however, December coffee rallied 340 points on crop concerns and as speculative buyers jumped back into commodities.
"Coffee's kind of feeling the heat from a commodity selloff across the board," said James Cordier, analyst and founder of Optionsellers.com.
A 2.8% decline in December crude oil futures led the way lower in commodities, with losses in sugar and cocoa markets also bearish for coffee as part of the soft commodity complex.
Equities traded on both sides of unchanged after the October jobs report showed that 190,000 jobs were lost during the month, taking the U.S. unemployment rate to a 26-year high of 10.2%. Analysts had expected a rate of 9.9%.
Economic uncertainty is normally bearish for commodities as it often means slack demand for physical assets.
While some traders believe underlying market support comes from concerns over uneven flowering for the Brazil crop and questions about the Colombian coffee crop, Cordier said he believes the crop's up-cycle this year will be the overriding factor.
"We'd have a lot more underlying support if this was an 'off-cycle' season, but it isn't," he said.
Coffee output runs in biennial crop cycles, and the 2009-10 crop will be on the high end of the cyclical production trend, he explained.
Colombian coffee production for the 2009-10 crop year is expected to reach 10 million bags, the country's National Coffee Exporters Association, or Asoexport, said Friday, up from 8.6 million bags in the 2008-09 crop year.
Colombia's National Federation of Coffee Growers, or Fedecafe, pegged the calendar year 2009 harvest somewhere below 9.3 million bags. Hopes for a production recovery in that timeframe hadn't materialized and the organization will be lowering its forecast soon from its most recent 9.3-million-bag estimate, general manager Luis Genaro said Friday.
The lower crop estimate is due to adverse weather during the growing season.
With the ICE coffee decline, December broke out of its recent range, forging a new one-week low of $1.3815 and violating nearby technical support at $1.3900. This attracted technical selling to the market and sell stops were tripped, a broker said.
Traders continued to spread the December and March contracts ahead of first-notice day on Dec. 19, a broker said.
Mostly favorable weather conditions are seen in top grower Brazil, though drier conditions this week are depleting soil moisture. Weekend rains and moisture early next week are expected to benefit the crop, DTN Meteorlogix said.
ICE warehouse stocks continue to contract, falling 18,930 bags to total 3.195 million 60-kilogram bags, the exchange reported.
ICE open interest fell 4,182 to total 129,497 lots, the exchange reported.
Volume is pegged at 32,166 lots traded, with 2,039 calls and 1,296 put options traded.
ICE Change Range
Dec $1.3890 dn 320 $1.3810-$1.4315
Mar $1.4195 dn 320 $1.4120-$1.4605
-By Tom Sellen, Dow Jones Newswires; 913-322-5177; tom.sellen@dowjones.com
(END) Dow Jones Newswires
11-06-09 1518ET
Copyright (c) 2009 Dow Jones & Company, Inc.
