Near-Term Coffee Prices Seen Range Bound - Sucafina - DowJones INTERVIEW

Neena Rai

Near-term coffee prices for both arabica and robusta will likely be range

bound since both markets have seen prices decline sufficiently, a senior member

of the trading desk at Swiss coffee trading house Sucafina told Dow Jones

Newswires.

Robusta coffee futures near-term will likely trade in a range of between

$1950-2150/ton, said a senior trading desk member at Geneva-based Sucafina,

with prices unlikely to go much lower than the $1900/ton threshold.

"As far as funds are concerned for robusta, it seems positions have been

liquidated and I'm not very sure people will want to go in short in front of

very strong demand, so it seems the market has reached a nice equilibrium,"

said the senior trading member.

Fund activity has had a major impact on the robusta market this year, with

investors buying up robusta coffee earlier than usual on forecasts of tight

supply.

But interest from speculators faded after Vietnam's production reached full

potential and exports hit record highs. Analysts believe that continued strong

farmer selling and good crop indications will prevent a short position like the

one in arabica developing given the strong underlying demand for robusta.

Robusta coffee futures hit a nine-month low this month on expectations of a

bountiful crop in the world's top producer, Vietnam. Meanwhile Vietnamese

farmers have been holding off selling their coffee beans, waiting for market

prices to reach about 40,000 Vietnamese dong a kilogram -- or $2,000 a metric

ton on NYSE Liffe exchange's benchmark robusta futures contract.

According to Sucafina, the Vietnamese crop for 2012-13 crop year will likely

be 10% smaller than last season's.

"We believe the current price is good for farmers, so there will be sellers

but demand in contrast to the supplies out of Vietnam, is outpacing by far.

Demand is much bigger than supply, and it's likely prices will be under

pressure medium-term," he said.

Should price spikes occur in arabica, more robusta being used in blends

cannot be excluded, said Sucafina, despite the general consensus that a ceiling

had been reached for the more bitter bean. Robusta is considered to be a

more-bitter variety, and therefore less expensive.

For arabica, near-term Sucafina said prices would likely trade in a range of

$1.50-1.80/lb.

"Funds are very short here and the Brazilians are holding back their crops.

We see no reason why prices should collapse near-term. Fund activity has been

on the right side of the market, pushing it down and I think they're playing

the long-term picture of an excess supply of arabica which will eventually

force roasters to use less robusta in blends."

At 1535 GMT, ICE coffee futures were up 0.9% at $1.5025/lb, recovering some

ground from Monday's dive to a fresh 29-month low.