Coffee shaves gains after gapping to new high

Coffee shaves gains after gapping to new high

LONDON (Reuter): Robusta coffee futures gapped up to a fresh three-week high of US$1,635 a ton at the London Commodity Exchange yesterday but shaved gains on Indonesian selling to end off its peak at midday, traders said.

"Fund and speculative buying took prices up, but it (the buying) ran slap into Indonesian selling," said one trader.

Fund and speculative buying in London followed a jump in New York prices to four-week highs on Thursday and expectations of further gains when it opens on tight prompt availability.

"It is looking like a serious situation in New York...the certified stocks are very low," said one trader.

At midday benchmark September was up $38 at $1,628 a ton but off its fresh three-week high of $1,635 a ton.

Turnover on the exchange reached 3,779 lots at midday.

The second-month November contract was up $33 at $1,601 a ton but below a intra-day high of $1,606 a ton.

Some traders have also said they are wary of a squeeze on the September contract .

"Fears of a squeeze on the September grew ...September open interest still remains high at 13,232 lots and will now be the focus of the market," broker GNI said on Friday.

Another trader, however, said this would be unlikely in the face of tight trading rules on New York's CSCE futures market.

Traders also said they expected the release of funds for Brazilian coffee growers next week to slow down coffee exports from the giant producer.

"The first flush of Brazilian coffee has come to an end," said one.

Last week the Brazilian government agreed that up to 250 million reais (US$240 million) be used from its coffee fund Funcafe to provide financing for farmers forced to sell coffee from the current crop for ready funds.