COMMODITIES : Coffee Futures Fall in Technical Selloff
Speculators bailed out of the coffee futures market Monday in a frantic, technically inspired selloff on New York’s Coffee, Sugar & Cocoa Exchange although fundamental factors continued to point toward higher prices.
On other markets, frozen pork belly futures plunged, soybeans fell sharply, precious metals were mixed, energy futures rose and stock index futures advanced.
Most coffee futures contracts settled 6 cents a pound lower, the permitted daily limit for price movement. The limitless contracts for delivery in March and May settled 9.43 and 8.75 cents lower, respectively, with March finishing at $1.4829 a pound.
“What we saw today was a wholesale bailout of speculative longs,” or players who previously had bet that prices would rise, said Kim Badenhop, a coffee market analyst with Merrill Lynch Capital Markets Inc.
Analysts said that after reaching a 27-month high of $1.669 a pound last Tuesday, coffee was brought down by profit taking by Friday’s close to levels that triggered Monday’s selloff.
The surge in coffee prices during December was rooted in tight-supply, strong-demand fundamentals, including a drought in the coffee-growing regions of Brazil and the arrival of winter in the Northern Hemisphere, the annual peak period for coffee consumption.
Analysts said those factors remained in place.
“The long-term fundamentals suggest we would move to the upside, but it gets kind of scary when you get selloffs like this,” Badenhop said.
Frozen pork bellies for both February and March delivery plunged the 2-cents-a-pound limit on the Chicago Mercantile Exchange in reaction to the Agriculture Department’s Friday report of a 2% increase in the number of pigs expected to be born from December through February. Hog and cattle futures finished mixed.
Live cattle settled 0.30 cent lower to 0.20 cent higher, with February at 73.55 cents a pound; feeder cattle were 0.10 to 0.62 cent higher, with January at 84.97 cents a pound; live hogs were 0.75 cent lower to 0.35 cent higher, with February at 46.37 cents a pound, and frozen pork bellies were 2 cents lower to 0.80 cent higher, with February at 42.45 cents a pound.
Soybean futures fell as much as 12 cents a bushel on the Chicago Board of Trade on forecasts for rain in Argentina, the world’s fourth-largest soybean producer, where early growing conditions have been dry.
Wheat and corn futures finished mostly higher, although those markets also were pressured late in the trading session by the Argentine rain forecasts. Oats ended sharply lower.
Tables, Page 12