NEW YORK (Dow Jones)--Coffee prices sank Tuesday as technical chart cues directed speculators to sell.
Nearby coffee for September delivery settled 5.85 cents, or 3%, lower at $1.6665 a pound on ICE Futures U.S.
Despite Tuesday's losses, arabica coffee prices have risen 22% in the last two months. The market hit a 12.5-year high Monday. A dearth of high-quality beans combined with technical chart patterns originally attracted buying. A large amount of those premium arabica beans will be unavailable until the fall harvests in Colombia and Central America. Though Brazil--the world's leading coffee producer--is currently harvesting a crop, analysts are divided on the possibility that those supplies will be able to plug the gap in premium bean supplies for a third consecutive year.
Speculative traders, like banks and hedge funds, liquidated bullish long positions, and more selling was triggered as prices fell below $1.70, said Boyd Cruel, senior softs analyst at Vision Financial Markets in Chicago. The September contract has strong support at $1.61, Cruel said.
Commercial traders that use the market to hedge trade of physical coffee are only lightly participating in the volatile market, said Marcio Bernardo, a commoditites analyst at Newedge USA in New York.
"Everything else that is driving this market is funds," Bernardo said.
Volume was estimated at 29,475 lots, according to exchange data. In options, approximately 4,018 calls and 4,440 put options traded on the floor.
ICE coffee open interest--the number of active positions left at the end of the session--decreased by 422 lots Monday to total 168,976 lots, according to exchange data.
ICE Change Range
Sep $1.6665 -5.85c $1.6515-$1.7445
Dec $1.6765 -5.65c $1.6610-$1.7520
Nearby coffee for September delivery settled 5.85 cents, or 3%, lower at $1.6665 a pound on ICE Futures U.S.
Despite Tuesday's losses, arabica coffee prices have risen 22% in the last two months. The market hit a 12.5-year high Monday. A dearth of high-quality beans combined with technical chart patterns originally attracted buying. A large amount of those premium arabica beans will be unavailable until the fall harvests in Colombia and Central America. Though Brazil--the world's leading coffee producer--is currently harvesting a crop, analysts are divided on the possibility that those supplies will be able to plug the gap in premium bean supplies for a third consecutive year.
Speculative traders, like banks and hedge funds, liquidated bullish long positions, and more selling was triggered as prices fell below $1.70, said Boyd Cruel, senior softs analyst at Vision Financial Markets in Chicago. The September contract has strong support at $1.61, Cruel said.
Commercial traders that use the market to hedge trade of physical coffee are only lightly participating in the volatile market, said Marcio Bernardo, a commoditites analyst at Newedge USA in New York.
"Everything else that is driving this market is funds," Bernardo said.
Volume was estimated at 29,475 lots, according to exchange data. In options, approximately 4,018 calls and 4,440 put options traded on the floor.
ICE coffee open interest--the number of active positions left at the end of the session--decreased by 422 lots Monday to total 168,976 lots, according to exchange data.
ICE Change Range
Sep $1.6665 -5.85c $1.6515-$1.7445
Dec $1.6765 -5.65c $1.6610-$1.7520
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