US benchmark arabica futures rose 2.37 percent to a one-month high on Monday, extending last week's gains on continued speculative short-covering amid a lack of producer selling, traders said.
New York Board of Trade September delivery settled up 2.40 cents at $1.0350 a lb after trading from $1.0250 to $1.0475 which was the contract's highest price since June 2's $1.0590. "You are going to see a short-covering rally now," said James Cordier, president of Liberty Trading Group.
If the September contract gets to $1.06, Cordier said, "that could be the beginning of a potential trend change and then you can see fund buying again." By June 27, non-commercial participants were holding a net short position of 10,432 lots of coffee futures, up 17.6 percent from the previous week, according to commitment of trade data released on Friday by the Commodity Futures Trading Commission.
Speculators have been gradually buying back their short positions following the September contract's bottom trade last week of 95.85 cents, its weakest price since November 2004. Rising arabica prices will be welcomed by farmers in top coffee producer Brazil, where a new crop is estimated to be about 10 percent more than the previous season due to the arabica's biennial crop cycle. Drier weather will allow normal harvesting in Brazil to resume this week and no severe cold is forecast during the first half of July, according to private forecaster Somar.
Volume amounted to an estimated 22,818 lots on NYBOT, up from Friday's count of 18,558 contracts. NYBOT markets will be closed on Tuesday in observance of US Independence Day. Trading will resume at normal business hours on Wednesday.