Key July lost 3.00 cents to finish at 120 cents a lb after trading 123-119 cents. September lost the same to 121.10 cents. Back months retreated 3.40-4.15 cents. The market eased at the open as speculative liquidation knocked arabicas back. Coffee prices have soared 13 percent over the last two days due to seasonal concerns in front of the frost season in top producer Brazil and robust buying by funds who sharply expanded their long positions in the market.

Options-related buying tied to some delta-hedging of positions also gave the market a boost. "It still looks pretty strong, although I feel cold weather seems to have been taken out," a physical broker said.

"The funds are in charge." Growers and meteorologists in Brazil said the coffee belt was frost-free with temperatures in the Londrina regionfalling to a minimum of 7 C (44.6 F).

Weather Services Corp (WSC) expects the temperatures to slip in the 40s F (5-9C) although no damaging cold is expected. "Cooler weather could return during the middle of next week. However, it does not appear to be nearly as cold as the next couple of mornings," said WSC.

The focus of the market now would be on the long positions of the bigger funds, which some in the trade now estimate has reached up at least 15,000 lots. "What's going to happen when they want to sell those positions. The roasters are not buying because it's a seasonably slow season and they don't need it," one dealer said.

US certified coffee stocks continued their remorseless march to higher levels. It stood at 402,245 60-kg bags as of May 19, against 395,404 bags as of May 18. There were 23,670 bags pending grading, 16,750 bags graded and 11,250 passed in.

Some analysts feel the next upside target for July would be the January 5 high of 124.25 cents a lb. The nine-day relative strength index(RSI) of July sugar retreated somewhat although it was still in overbought territory with a reading of 73 at the close on last Thursday from the previous figure of 83.

An RSI reading of 70 or higher usually meant the market is overbought on a short-term basis. Volume traded hit an estimated 19,346 lots against the previous estimated volume of 31,225 lots. Call volume reached an estimated 5,484 lots from the previous estimate of 9,898 lots. Put volume hit an estimated 3,809 lots against the previous estimated total of 8,146 lots.