CSCE coffee futures closed lower on Wednesday, as commodity funds withdrew their support and prices weakened until roaster and industry demand appeared below 68.50 cents for the March future, dealers said.
"Coffee's bearish days are over, but the market is not going to rocket higher. Roasters have let their coverage run down, and you'll be seeing them buy dips like they did today," said one dealer.
The nearby March arabica coffee lost 0.60 cent to close at 69.35 cents a lb, but well above the lows of a 68.40 to 69.95 cent trading range.
Brokers said March dipped to 68.50 cents about four times on Wednesday, with roasters absorbing the selling.
On Monday the benchmark contract touched 72 cents, its best level since September 12, but prices were considered overbought and have been correcting lower, traders said.
May coffee also lost 0.60 cent to 71.05 cents and the back months-ended 0.60 to 0.70 cent lower.
Estimated volume dropped to just 12,580 lots on Wednesday from the 16,504 lot pace on Tuesday.
Option trading slowed to 4,412 calls and 1,870 puts. Traders continue to maintain an optimist outlook for coffee prices.
"Coffee is making a slow, side-step rally.
With the Brazilian real strengthening, farmers are less willing to sell and I think we'll see a smaller-than-anticipated 2004/05 crop from Brazil," said Craig Harris, a commodity-trading advisor (CTA) and president of Harris Capital Management.
On the fundamental front, Mexico's December coffee exports rose 42.5 percent to 155,328 60-kg bags from 108,927 bags in the year-earlier period, the Mexican Coffee Council said in a statement on Tuesday.
The government-run coffee authority said exports between October 1 and December 31, the harvest year to date, rose 9.2 percent to 351,715 60-kg bags, from 322,145 bags in the year-earlier period.
Mexico ranks as the world's fourth largest producer. Chartists look for further gains once the market has completed its consolidation pattern.
Support is expected at 68.40 cents and 68 cents basis March, with resistance expected at 70.80 cents and then 71.50 cents. CSCE is a subsidiary of the New York Board of Trade.