COMMODITIES-Biggest week for coffee in 14 years; gas near 5-year high

Fri Feb 21, 2014 3:22pm EST

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By Barani Krishnan
    NEW YORK, Feb 21 (Reuters) - Arabica coffee posted its
biggest weekly gain in over 14 years on Friday as the drought in
top producer Brazil pushed the market into overbought territory,
and natural gas traded near a five-year high on bitterly cold
U.S. weather forecasts.
    Raw sugar also rose on Brazil's dry conditions, hitting a
two-month high as funds and investors covered short positions in
a rallying market.
    Arabica gained almost 20 percent on the week, its largest
weekly rise since December 1999. Natural gas climbed 16 percent,
its biggest gain since a 20 percent jump in the final week of
January.
    For the year, both commodities were up 50 percent.
    The ferocity of the gains, including a more than 10 percent
jump in both markets on Wednesday, has taken traders aback, with
some suggesting that momentum traders and hedge funds may be
rushing into a fundamental rally late in the game.
    Analysts said the gains also speak to a larger phenomenon
that has transformed commodity markets over the past year. Major
raw material indexes, and the commodities they track, have
decoupled from stock markets and foreign exchange rates to chart
an independent course, ending a five-year period of
unprecedented correlation following the financial crisis.
 
    "It's been a monster move," Jeff Grossman, president at New
York's BRG Brokerage, said in a reference to natural gas. "This
is a market that's going to be hanging in there for awhile."
    The 19-commodity Thomson Reuters/Core Commodity Index
 rose almost 3 percent on the week, its biggest move
higher since the week of Sept. 14, 2012.
    For Friday, however, the commodities bellwether was flat on
weakness in its main component, U.S. crude oil, and
markets like heating oil, corn, wheat and
cocoa.
    U.S. arabica's benchmark second-month contract, May,
settled little changed, up 0.05 cent at $1.6950 cents per lb,
below Thursday's 16-month peak of $1.7750. For the week, the
contract was up 19 percent amid heavy, volatile trade.
    Analysts have revised down crop estimates for Brazil after
local forecaster Somar predicted that key arabica growing
regions will remain "without significant rain or with light
showers."
    The Relative Strength Index for May arabica showed a reading
of 80.7. Since last Friday, the index has been at above 70,
indicating an overbought market.
    "Ultimately what the market is trying to do is price in
uncertainty, price in risk," said Alex Parry, a coffee broker at
ABN AMRO.
    In raw sugar, the benchmark front-month contract 
rallied 0.39 cent, or 2.4 percent, to settle at 16.72 cents a lb
in New York. It earlier rose to 16.79 cents during the session,
the highest price for a spot contract in raw sugar since
December. 
    Natural gas rose as much as 4 percent on the day before
closing off its highs, as some players took profit on the
market's huge move for the week.
    Front-month natural gas for delivery in March 
finished up 7.1 cents, or 1.2 percent, at $6.135 per million
British thermal units. The session high was $6.308 per mmBtu,
not far from Thursday's five-year high of $6.40.
    U.S. weather forecasters are calling for "a far-reaching,
intense late winter cold snap" next week and into early March
that will stretch across much of the country and into southern
states. Sub-zero temperatures were expected across the northern
tier of the country, they said. 
    Prices at 2:48 p.m. EST (1948 GMT)      
                            LAST/      NET    PCT
                            CLOSE      CHG    CHG
US crude             102.09    -0.66  -0.6%
Brent crude         109.72    -0.58  -0.5%
Natural gas           6.135    0.071   1.2%
                                                          
US gold             1323.90     6.80   0.5%
Gold                1326.86     4.35   0.3%
US Copper              3.29     0.01   0.4%
LME Copper         7155.00     0.00   0.0%
Dollar               80.255   -0.031   0.0%
CRB              301.584    0.334   0.1%
                                                          
US corn               453.00    -2.25  -0.5%
US soybeans          1370.75    12.50   0.9%
US wheat              609.75    -6.50  -1.1%
                                                          
US Coffee            168.55    -0.25  -0.1%
US Cocoa            2929.00   -21.00  -0.7%
US Sugar              16.72     0.39   2.4%
                                                          
US silver            21.782   21.565   1.6%
US platinum         1427.90    15.40   0.0%
US palladium         740.00     3.70   0.5%

 (Reporting by Barani Krishnan; Editing by Paul Simao)
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