CSCE coffee futures finished with moderate gains on Tuesday, after back-and-forth action between buyers and sellers that extended the range up to three-week highs, traders said.
"There was a little more hedging against options trades. There was some spec buying. There was also some fund selling and spec selling up at the highs of 73.00 (cents a lb in July coffee)," said one coffee broker.
Most-active July coffee rose 0.45 cent to settle at 72.40 cents a lb., after trading from 71.50 to 73.00 cents. May arabica was up 0.55 cent to close at 70.45 cents a lb, after trading in a 70.00 to 70.75 cents band.
Back months ended 0.30 to 0.45 cent higher. While coffee prices climbed to levels last seen on April 20, traders said they saw decent volume on offer at the highs. "The market has held three or four attempts at the lows in recent weeks.
So, with the funds being relatively flat, there is certainly a decent amount of support," a dealer said. With the range extending higher, he said, on Tuesday's price action suggests funds may re-enter the market on the long side.
Trade in Brazil seemed fairly quiet on Tuesday after a bout of heavy selling a day earlier when the dollar advanced on the Brazilian currency.
On Monday, the dollar settled at 3.14 reais, up 7.5 percent from a week ago and at its highest level since April 2003 boosted by expectations of a US rate hike. But Brazil's currency, the real, strengthened as much as 2 percent late on Tuesday, aided by improvements in overseas bond markets.
Brazil's internal coffee prices rose by as much as 5 reais, which allowed some physical coffee deals to be transacted. Most players remained cautious, preferring to wait until the currency market stabilised.
New York traders said dealings in Brazil had little impact on prices on Tuesday. "You had a lot of relatively bearish news out on Monday and coffee rallied 2 cents. Today was pretty quiet and it rallied 1-1/2 cent.
There wasn't much happening, but there was a little bit of spec buying, just based on how the market has been reacting recently," a trader said.
Otherwise, coffee players are gearing up for the frost season in Brazil, which is around the corner. While some players are preparing for a possible freeze, others think the Brazil weather play is more hype than reality.
On Tuesday, weather service Meteorlogix said it forecast dry conditions with temperatures near or below normal in the coffee growing regions in Brazil. It said it expects generally favourable conditions for the maturing crop for the next few days.
Final estimated coffee volume at 12,750 lots was similar to Monday's official count of 12,295 lots. Total coffee call options came to 4,944 lots on Tuesday. Puts jumped to 5,413 lots.
As of May 10, open interest in coffee declined by 339 lots to 98,199 lots. Technicians saw support for July coffee at 71.50, then 69.20 cents a lb. Resistance was pegged at 73.00, then 73.50.
CSCE is a subsidiary of the New York Board of Trade.
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