ICE arabica coffee futures tumbled to the lowest level in more than three years on Wednesday, as a speculator selloff extended recent losses seen on ample supplies and a favorable crop outlook in top producer Brazil, dealers said.
Raw sugar futures on ICE hit a near three-year low under pressure as the Brazil cane harvest ramped up, while cocoa futures eased.
The most-active July arabica contract on ICE Futures U.S. sank 4.25 cents, or 3.2 percent, to settle at $1.2845 per lb after hitting a contract low of $1.2825. That was the weakest level for the front-month contract since March 2010.
Coffee was under pressure from stronger U.S. dollar and producer selling. Speculator selling picked up as the day’s losses triggered sell stop orders located just below the recent contract lows, dealers said.
It was the front-month contract’s largest daily loss in one month.
“We’ve blown the (sell) stops. We made some new lows, so we got a new round of selling,” said Jack Scoville, vice president for Price Futures Group in Chicago.
Dealers said record off-year production in Brazil is expected to outweigh any production setbacks linked to an outbreak of the leaf disease roya in Central American crops.
The market has resumed its downtrend in the last few sessions after rising more than 10 percent in early May, boosted by technically driven buying and investor short-covering as Brazil entered the season when frost can threaten its coffee crop.
September arabica coffee on ICE finished down 4.2 cents, or 3.1 percent, at $1.3075 per lb, after touching $1.3060, the lowest level for the second month since April 2010.
Open interest totaled 162,110 contracts on Tuesday, up by 3,762 lots from the previous session, ICE data showed. The increase came as prices fell, interpreted as new short positions entering the market.
Liffe July robusta coffee settled down $9, or 0.4 percent, at $1,999 a tonne.
SUGAR HITS FRESH LOW
ICE raw sugar futures sank to an almost three-year low under pressure from the stronger U.S. dollar, expectations of ample supplies as the cane crush in top producer Brazil sped up, and producer selling near 17 cents a lb, dealers said.
July raw sugar on ICE fell 0.21 cent, or 1.2 percent, to close at 16.65 cents a lb, after touching 16.60 cents a lb, the lowest level for the front month since July 2010.
Raw sugar had gained earlier, but a failed test of resistance at 17 cents a lb caused the market to reverse course, dealers said.
Expectations that more of Brazil’s cane harvest would be diverted to ethanol over sugar production had begun to give way, prompting more bearishness for sugar prices, said Michael McDougall, vice president for Newedge USA in New York.
Sugar has been in a long-term downtrend for more than two years and the acceleration of the cane harvest in top producer Brazil has added to already plentiful supplies.
Dealers have said that a move toward more ethanol production would divert cane output away from sugar production and help erode a global surplus of sweetener.
August white sugar on Liffe fell $3.40, or 0.7 percent, to settle at $472.90 a tonne.
July cocoa futures on ICE fell $28, or 1.2 percent, to settle at $2,317 a tonne. The front-month contract surged more than 17 percent from March lows to early May highs.
“We had moved up on a technical trade and now we’re consolidating, testing the resolve of the bull,” Scoville said.
Speculators trimmed a large bullish position in ICE cocoa futures and options, U.S. government data showed on Friday, but it remained near a five-year high.
July cocoa on Liffe finished down 7 pounds, or 0.4 percent, at 1,562 pounds a tonne with losses limited by the weakness of sterling.