Arabica Coffee Bounces; Cotton Rebuffed From 93.75c/Lb. Again

Alexandra Wexler

  NEW YORK--Coffee prices rebounded from early losses Monday after weekend rains in top-grower and

exporter Brazil disappointed some traders.

  Arabica coffee for delivery in May on the ICE Futures U.S. exchange fell to $1.66 a pound, the

lowest intraday level since Feb. 20, before turning around. The contract was recently 0.5% higher at

$1.7205 a pound.

  Coffee futures are coming off their biggest one-week drop in nearly 15 years last week as the

return of rains to parched growing areas of Brazil quelled concerns about damage to the arabica crop

and led to profit-taking by investors.

  But "the rains in Brazil over the weekend were not as significant as was anticipated," said Julio

Sera, senior risk management consultant at INTL FCStone in Miami. It is still unclear how much

damage Brazil's arabica production has suffered.

  January and February were the driest months in Brazil in 30 years, according to Somar

Meteorologia, a Sao Paulo-based private weather service.  A lack of moisture can stunt the

maturation process of coffee cherries--the fruit that surrounds the seeds that are roasted to make

coffee beans.

  The drought has trimmed the market's expectations for a bumper crop, but the initial surge in

prices might have blown the situation out of proportion, traders and analysts say now.

  "The extent of the damage, and precisely how much loss we're in for, is still up in the air until

the actual harvesting begins" in May, Mr. Sera said. He sees range-bound trade between Monday's low

of $1.66 a pound and about $1.90 a pound until then.

  Cotton futures were rebuffed once again from 93.75 cents a pound on Monday, the near one-year high

that futures touched on March 13, as buying continued to thin out around that level.

Cotton for delivery in May was recently trading at 92.75 cents a pound, down 0.6% on the day.

  "My upside target has been 95 [cents to] 96 cents, and the renewed interest by fund managers who

have not been involved in cotton to date suggests they are closely watching for a break above key

resistance at 94" cents, said Sharon Johnson, an Atlanta-based cotton specialist representing KCG

Futures.

  Earlier this month, the U.S. Department of Agriculture raised its projection for U.S. exports of

the fiber by 1.9% to 10.7 million bales, citing strong demand from abroad. As a result, federal

forecasters also revised their estimate for the amount of cotton left over at the end of the current

marketing year on July 31 to 2.8 million bales, the smallest amount in three seasons.

  But U.S. farmers are expected to plant more cotton this spring than they did last year, according

to a survey released in February by the National Cotton Council. That could lead to the 2014-15 crop

being almost a quarter larger than the current season's, the industry group said.

  "As much as a higher planted area will generate high production projections, weather will be the

final arbiter in that regard," Ms. Johnson said. "It will be several months before we know with any

certainty."

  In other markets, orange juice for delivery in May was recently down 0.1% at $1.5275 a pound and

cocoa for May delivery was 0.7% higher at $2,978 a ton. Raw sugar for May delivery was flat at 16.83

cents a pound.