With all of the focus lately on Crude Oil, metals like Gold and Silver, and grain markets; attention appears to have been deflected attention away from another market which has bounced back nicely: Coffee.

Prices in New York have climbed to a 34-year high on a broad rally in commodities today on the back of reports earlier in the week that the world’s largest grower, Brazil, would experience a cyclical decline in output occurring in two years, according to a Bloomberg report which said the coffee output of Brazil will be 13% smaller this harvest when compared to last year’s.  Additionally, a Rabobank report showed a stronger Arabica forecast for the rest of 2011. And despite its blanket warning for commodities last week, a Goldman Sachs report has also been in favor of enhanced prices for coffee as demand across the emerging markets like India and China are expected to remain robust.  Meanwhile, there are reports that adverse weather characterized by above-average rain fall slated for next month may negatively affect coffee output in Colombia, the second-largest producer of Arabica beans after Brazil.

According to FinViz.com, Coffee is up 24.9% so far this year, and 128.9% over the past 12 months, which is second to only Silver (+153.4%) over that period.

[Source: FinViz]

And yet… looking over the CTAs we’re working with, it seems as though no one is biting for the long positions in coffee- not even Dighton Capital Limited, LLC, which has been well known for latching onto the softs markets, and seemed to have the perfect counter-trend set up they like to jump into as a contrarian during Coffee’s sell off in March (down 10% from its 2011 high at one point).

The only CTAs that are trading coffee right now are diversified option sellers Financial Commodity Investments (FCI) – OSS and HB Capital Management Diversified Options, which would actually prefer the market was more range bound than heading higher and higher.

Why the hesitation to participate among other programs? Probably because Coffee has long been considered one of the more volatile commodity markets (sometimes mentioned in the same breath as Pork Bellies). But in looking at the average daily move and volume comparisons, it doesn’t seem that reputation is all that valid.  Perhaps more CTAs should look at adding it to their portfolios, before it retraces all the recent gains in a nice downtrend…