Coffee continues to hover near the contract highs

Coffee continues to hover near the contract highs and is worthy of put accumulation at these levels. Cocoa is at a fresh contract high as well and is rallying on fears of a sustained export ban in the Ivory Coast. This is a truly historic opportunity to get short cocoa as a top is anticipated and the downside fallout could be monumental. Cotton is making another attempt, its 3rd since the initial breakout rally, of reversing a sharp selloff to hit fresh highs. I do not believe cotton has it in it to make another major move higher, but then again I did not suspect that had it in it to rally last month either. Sustained buying is occurring because of a real shortage of supply, and if real delivery is needed then epic short covering and price surges have little choice but to happen and run until the buying demand is exhausted. When will the buying demand be exhausted? I believe there is a real likelihood that the high is already in and this current attempt to rally will be met with strong selling well below 208 on the futures. OJ continues to make new highs but is fast approaching critical resistance at 190. If broken the market has little technically stopping a run to the 2007 highs of 210. 

source: http://www.fxstreet.com/technical/market-view/the-weekend-commodities-review0109/2011/02/28/

COFFEE AND COCOA FORECATS FOR TODAY AND MARKET CLOSING REVIEW, 25 feb 2011

* Rebels capture town in western Ivory Coast

    * Coffee market edges higher underpinned by tight supplies

    * Sugar market eyes Monday's expiry of March raws on ICE

Cocoa futures on ICE rose to close  at a 32-year high Friday as rebels seized a town in top grower Ivory Coast,  while raw sugar rebounded ahead of the March contract's expiry Monday.      Coffee prices rose after a two-day setback.      

The United Nations Secretary General said Ivory Coast was closer to the  brink of a new civil war after rebels controlling the north seized a town  in government territory and were heading south.

    "Of course the instability in the Ivory Coast is the main reason for  the push up," said Derrick Lewis, a senior trader with brokerage Cleartrade  Commodities in Chicago.

    May cocoa on ICE  rose $14 to finish at $3,639 per tonne, the  highest settlement since January 1979, after touching a session high at  $3,650. This widened the premium of May to $66 compared with July   from $65 on Thursday.

    The contract has risen about $600, or 28 percent, since early January  as the crisis in Ivory Coast has deepened. Volume, however, was thin at  about 8,500 lots, down about 60 percent from the 30-day average.

    "Until the situation is settled, there's concern about supply," Lewis said, referring to the reason for the premium.

    The sterling-based Liffe contract was also higher with May < closing up 18 pounds at 2,368 pounds a tonne, after hitting the highest for  the second position since July 2010 at 2,377 pounds.

    "Most of the people that we speak to are now leaving the country  because it's too dangerous," a European trader said, adding the country's  cocoa industry was at a standstill.

POSITI     DIFFICULT ON  

    "The (cocoa) trade is in a difficult position, on the one side  (presidential claimant Alassane) Ouattara wants them to continue to buy  from the farmers because they need the money, on the other Gbagbo says keep  exporting because he needs the money," plus there's EU sanctions in place,  the trader said.

    Raw sugar futures were higher with the market's focus on Monday's  expiry of the March contract.

    The nearby premium closed at 2.78 cents a lb, widening from 2.39 cents  at the close on Thursday, with the decision by Russia earlier this week to  cut import tariffs  seen increasing the appetite to take  delivery.

    May raw sugar futures  jumped 0.91 cent or 3 percent to finish at  28.74 cents per lb while May white sugar on Liffe rose $21.40 to  finish at $726.40 per tonne.

    Arabica coffee futures on ICE were higher as the market began to creep  back up towards Tuesday's peaks which were the highest levels seen in 34  years at $2.7840 per lb, basis May.

    The market suffered its weakest two-day performance in a month on  Wednesday and Thursday with the setback seen largely as a technical  correction after its prolonged advance and as investors got out of their  long positions.

    May arabica coffee  rose 3.15 cents to finish at $2.6780 per lb,  in an inside day.      A shortage of high quality arabica coffee from Colombia, suffering from  several consecutive smaller crops, has fueled the coffee rally and a  drawdown of stocks.

    "The funds are very heavily long so a bit of a wash out could be on the  cards but I am not sure we will see a calamitous collapse as stocks remain  so low," said a London-based broker.

    May robusta coffee  gained $10 to finish at $2,339 a tonne as  dealers noted a pick-up in exports from top robusta producer Vietnam.  

    Vietnam's February coffee exports rose around 16.9 percent from the  same month in 2010 to 90,000 tonnes, or 1.5 million bags, in line with  market expectations, and could offer some relief to tight markets. 

source: https://portal.hpd.global.reuters.com/site/applist.aspx

Liffe cocoa sets 7-month peak on Ivorian conflict

    * Liffe May cocoa  ends up 18 pounds at 2,368 pounds a tonne after earlier hitting 2,377 pounds, the highest level for the benchmark second month since July 2010. Market supported by fighting in top grower Ivory Coast which has raised the prospect of a return to open war.

   * Liffe May robusta coffee <LRCc2> ends up $10 at $2,339 a tonne. Market supported by renewed strength in arabica market although a rise in exports from Vietnam helped to cap gains.

   * Liffe May white sugar <LSUc1> rises $21.40 to close at $726.40 a tonne. Market remains extremely volatile in the run-up to Monday's expiry of the March raw sugar contract on ICE.

https://portal.hpd.global.reuters.com/site/applist.aspx

Nestle to buy 1.2 mln Colombian coffee bags in '11

    * World-wide purchases to total 13.65 mln 60-kg bags

   * Nestle to buy 1.2 million bags in Colombia in 2011 

   Nestle , the world's biggest food maker, expects to buy 1.2 million 60-kg coffee bags from Colombia this year, little changed from 2010, the company said on Thursday.

   Colombia, the world's No. 1 producer of high quality washed Arabica beans, has had two years of lower coffee output due to bad weather, pests and a tree renovation program, but expects a slight recovery of bean output this year.

   "Right now with the conditions we have, I don't think that (purchases) will grow much," said Ricardo Piedrahita, Nestle's supply chain director for Colombia.

   Colombia will provide about 9 percent of the firm's total bean purchases this year, which are expected to total 13.65 million 60-kg bags, Nestle said.

   Colombia's coffee federation said on Thursday that coffee production this year was expected to reach at least 9 million 60-kg bags, the highest level since 2008, as better weather helps flowering. [ID:nN24251937]

   Fiona Kendrick, Nestle's senior vice president of beverages, said the firm expected to purchase 819,000 tonnes of coffee worldwide in 2011, a 5 percent increase from the 780,000 tonnes purchased last year.

   "We obviously look to buy our coffee accordingly to the origins that we require for our needs ... Growth is very good at approximately 5 percent," Kendrick told Reuters on the sidelines of a press conference held in Bogota.

   Climate change affected coffee plantations throughout Colombia in 2010 as abrupt moves from drought to strong rains caused the appearance of roya and other fungi, according to the government's agriculture institute.

   About 300,000 hectares (741,300 acres) of the total 900,000 coffee hectares were hit by roya prompting growers to cut trees planted with the varietal Caturra -- which has high production and good quality but is not resistant to roya -- and replant.

   To support Colombia's growing production and purchases, Nestle along with the coffee federation launched a $3.17 million program to help growers plant trees resistant to pests and apply environmental friendly practices.

   The plan calls to distribute 50 million resistant tree varietals by 2020. This year, they will distribute 4 million castilla trees, a varietal resistant to roya and renovate 727 hectares of coffee land, they said.

   With the plan, Nestle expects to double the amount of coffee it buys directly from farmers and their associations over the next five years, the company said.

   The Andean country produced 8.9 million bags last year and 7.8 million in 2009. In 2008, it produced 11.1 million bags, about its historic annual average

source: https://portal.hpd.global.reuters.com/site/applist.aspx

Starbucks wins Kraft appeal over coffee deal

* Appeals court panel sees no imminent injury to Kraft

   * Starbucks to go ahead with new partner March 1

   * Judges affirm Jan. 28 lower federal court ruling

     NEW YORK, Feb 25 (Reuters) - The final legal obstacle was removed to Starbucks Corp <SBUX.O> ending its coffee distribution agreement on March 1 with Kraft Foods Inc <KFT.N> by a U.S. appeals court ruling on Friday.

   A three-judge panel of the U.S. Court of Appeals for the 2nd Circuit in New York affirmed a lower court ruling of Jan. 28, denying Kraft's request to stop Starbucks from moving ahead with its plan to use a new partner to distribute packaged coffee to supermarkets in North America and Europe.

   The business between the world's largest coffee chain and North America's largest packaged food maker brings in $500 million a year in revenue -- and whether or not Starbucks must pay fair market value to end the deal will be decided in arbitration in the coming months.

   "We conclude that Kraft has failed to show that it faces an actual and imminent risk of injury that cannot be compensated by money damages," said the written ruling by the panel, which heard 20 minutes of oral arguments on Friday.

   The panel said the U.S. District Court "did not abuse its discretion" by denying Kraft a preliminary injunction. "We have considered Kraft's remaining arguments and find them to be without merit."

   Kraft said it would put up a "vigorous defense" of its rights in arbitration.

   "The Second Circuit did not rule on the fundamental issue of whether Starbucks can exit our contract without paying the fair market value, plus a premium," Kraft general counsel Marc Firestone said in a statement. "That question will be decided in arbitration."

   In January's ruling from the bench, Judge Cathy Seibel in White Plains, New York, had noted that Starbucks could end up owing Kraft "a boatload of money" if an arbitrator decided the coffee chain breached a 1998 agreement with Kraft.

   Lawyers for Kraft argued in both courts that it would suffer "irreparable harm" if Starbucks went through with its plan to move distribution to privately held Acosta Inc on March 1.

   Starbucks welcomed the appeals panel's affirmation of the lower court's decision.

   "With yet another failed attempt by Kraft to use any means to further confuse our mutual customers behind us, we now look forward to the smooth transition of the business to Starbucks on March 1," spokesman Alan Hilowitz said in a statement.

   The two companies are in arbitration. Starbucks said Kraft had repeatedly breached the agreement, under which Kraft distributes Starbucks coffee to an estimated 40,000 grocery stores and other retailers in all 50 U.S. states and Canada, as well as in Britain and Europe.

   The cases are Kraft Foods Global Inc v Starbucks Corp, U.S. District Court, Southern District of New York, No. 10-09085 and No. 11-389-cv in the U.S. Court of Appeals for the 2nd Circuit in New York. (Additional reporting by Lisa Baertlein and Martinne Geller; Editing by Bernard Orr and Matthew Lewis)

  source: https://portal.hpd.global.reuters.com/site/applist.aspx

Costa Rica revises up 2010/11 coffee crop estimate

   SAN JOSE, Costa Rica,   Costa Rica said on  Thursday it expected its 2010/11 coffee harvest to rise as much  as 5.4 percent above last year's crop after damages from heavy  rains proved to be less serious than originally thought.

    Costa Rica was battered by heavy rains last year after the  beginning of the harvesting season in October, raising fears of  serious damage to the country's high-quality coffee crop.

    But Ronald Peters, director of the country's national  coffee institute known as Icafe, told Reuters the 2010/11  harvest would come in between 1.55 million and 1.57 million  60-kg bags, a jump from the 1.49 million produced last season.

    Peters said nearly 80 percent of Costa Rica's crop already  has been sold as arabica coffee prices hover arround three decade highs.
source: https://portal.hpd.global.reuters.com/site/applist.aspx

LatAm nations see brighter outlook for coffee output

    * Mexico 10/11 harvest seen at 4.2 mln 60-kg bags

    * Colombia sees 2011 coffee output at 9-9.5 mln bags

    * Rains in Costa Rica less damaging than first thought

Colombia, Mexico and  Costa Rica on Thursday all boosted this year's coffee  production outlooks, which may help ease supply concerns that  have lifted arabica coffee prices to near three decade highs.

    Colombia, the world's top producer of high-quality washed  arabica beans, is expected to reach at least 9 million 60-kg  bags, the highest level since 2008, as better weather helps  flowering, the country's coffee federation said.

    A shortage of arabica coffee from Colombia, suffering from  several consecutive smaller crops, has fueled the coffee rally  and a drawdown of stocks.

    ICE arabica futures have doubled in price over the past  eight months and surged on Tuesday to the highest level in more  than 30 years at $2.7840 per lb. But coffee prices fell back on  Thursday in its weakest two-day performance in a month on  investor liquidation.

    "News from Colombia regarding the health of the crop has  been encouraging but the market will prefer to see this in  physical stocks," said Abah Ofon, analyst at Standard Chartered  Bank.

    Dealers said coffee roasters have been increasing the use  of cheaper robusta coffee in their blends where possible.

    "It helps to give them a bit of breathing room," said Bill  Raffety, senior analyst for futures brokerage Penson Futures in  New York, referring to Colombia's higher crop forecast.

    The Andean country produced 8.9 million bags last year and  7.8 million in 2009. In 2008, it produced 11.1 million bags,  about its historic annual average.

        POOR WEATHER  

  Adding to the breathing room, was a forecast by Mexico's  national coffee association of 2010/11 production at 4.2  million 60-kg bags, in line with output last season.

    Coffee exports from Mexico -- a major arabica producer --  have fallen this year from last, raising concerns about the  possibility of a smaller crop.

    "We don't think the harvest could drop significantly  (compared to last year)," Rene Avila, an operations coordinator  at the national coffee association Amecafe, told Reuters.

        Avila said while the crop would not be significantly  smaller than last year, it is coming in more slowly due to  unfavorable weather in Mexico's No. 2 coffee growing state of  Veracruz.  

    Frosts in the central states of Hidalgo, San Luis Potosi  and Puebla may have damaged the quality of some beans but  overall volume is not expected to fall.

    "With these prices, producers are not leaving a single bean  on the trees," Avila said.

    Roasters are filling orders for high-quality coffee from  Costa Rica, known for its top-end coffee, with nearly 80  percent of the country's crop already sold, said Ronald Peters,  executive director of Icafe.

    Costa Rica had originally seen its coffee harvest dropping  this year on heavy rains after the beginning of the harvest  season in October, but now says the damage was not as bad as  originally expected.

    The country now sees 2010/11 output at between 1.55 million  and 1.57 million 60-kg bags, a 5.4 percent jump from last  season, Peters said.

    "Luckily, we lost only half of what we thought was damaged  (by the rains)," he added.

    Prolonged adverse weather conditions and flooding had  trimmed coffee production, and also has hurt output in robusta  bean producers Indonesia and Vietnam.

    Colombia's federation says that with more favorable  weather, advances in the rejuvenation program and adequate  fertilization, Colombia could reach its official production  target of 14 million 60-kg bags in around three years. 

source: https://portal.hpd.global.reuters.com/