Coffee Prices Drop As Punters Exit

Coffee prices fell sharply on Monday as speculators exited positions held in the expiring May futures contract, sparking a round of profit-taking from last week's run-up to 20-year highs.

At the Coffee Sugar and Cocoa Exchange in New York, coffee for May delivery ended at 255.25 cents, down 21.25 cents on the day.

It touched its life-of-contract high at 280 cents--also the highest price since June 1977--in early trading before a wave of liquidation ahead of the noon expiry prompted a price collapse. July coffee ended at 246.25 cents, down 6.90.

Traders said that world coffee producers now meeting in London might opt to suspend a scheme of export quotas to keep coffee prices competitive with other beverages might have helped spur the sell-off.

"There's a concern that as the market approaches $3.00, you start to impact consumption," said Dean Witter analyst Steve Platt. "And producers don't want to shut off consumption."

Platt said Colombia's announcement late on Friday that it was reopening registrations for coffee exports for May and June shipment may also have fed selling, including some sales of futures by producer nations to secure a high price.

Colombian officials had said last week they were having great difficulty finding supplies to satisfy export needs.

Coffee prices have soared since December on a variety of factors that have prompted supply worries, including smaller crops in Central America and Colombia, tight stocks at US coffee roasters and strikes delaying Colombian shipments.

The market remains concerned about the possible cold weather damage in Brazil.

The winter season for the top grower begins in the months of June- July.