Coffee prices seen firm on good overseas sales

Domestic coffee prices are likely to rise during the week due to good export off-take and tracking trends in global markets, said traders on Monday. Overseas coffee prices are seen up on hedge fund buying, prompted by weather uncertainties in Brazil and lower crop production in Vietnam.

"Prices are likely to move up as export off-take is good," said AN Devraj, proprietor, Sarathy Curing Works. Devraj said robusta variety could gain more than arabica owing to a firm overseas market for the former and their prices currently were quoted almost Rs 200 higher. He also said a huge uncertainty existed over the correct coffee production in the country.

According to the Coffee Board, in its revised estimate, it has projected the crop at 2.81 lakh tonne this season (November 2005-October 2006) from the initial estimates of 2.94 lakh tonne and 2.75 lakh tonne last season.

In India, arabica arrivals begin at the end of December while robusta is mostly harvested in February. "We are not sure of what the correct estimates are," said Devraj. "There are talks in the market that robusta could be a bumper one while there may be a shortage of arabicas."

May contract on the Ahmebadabad-based National Multi Commodity Exchange of India is likely to find resistance at Rs 5,385 per 100 kg and the support at Rs 5,212, said an analyst with Geojit Financials.

At 1445 IST, May futures were at Rs 5,350 per 100 kg, unchanged from Saturday's close. "Overseas markets are in the hands of fund players," said a Bangalore-based trader.

Coffee is the world's second largest traded commodity in the world, next to crude oil. "Overseas prices would be bullish, mainly due to dry weather in Brazil and the setting in of frost season there," said Gnanasekar Thiagarajan, director, Commtrendz Risk Management Services.