NEW YORK (Dow Jones)--Coffee futures plunged to their lowest levels in nearly six weeks as traders took profits ahead of harvests throughout Central America and Colombia.
Analysts said losses early in the day triggered a string of automatic sell orders that sent prices to their lowest level since Aug. 27.
"The funds that were long have some stops in there to protect profits," said analyst Bill Raffety at commodities futures brokerage Penson GHCO, referring to speculative investors, such as hedge funds, that had standing orders to close out positions once prices fell below certain levels.
Coffee for December delivery settled 8.6 cents, or 4.8%, lower at $1.7250 a pound on ICE Futures U.S.
Coffee futures have soared since June on fears that drought in Brazil, the world's biggest coffee grower, would damage its crop of highly sought arabica beans and leave world supplies unable to keep up with demand. But those concerns now appear overblown.
"Prices are very unjustified," said Tom Mikulski of Lind-Waldock in Chicago.
Now that Brazil is getting wetter weather and a global surplus is more likely, traders are quickly pulling back. Monday's session marked the fourth consecutive day coffee futures settled lower.
"October kicks off harvest season for Central America and Colombia," said James Cordier of Liberty Trading Group. "Supplies are not going to be huge, but they will be available this month."
He said prices could dip as far as $1.65 pound in the coming days should funds continue closing out long positions, essentially cashing in on bets that prices would rise.
Analysts said losses early in the day triggered a string of automatic sell orders that sent prices to their lowest level since Aug. 27.
"The funds that were long have some stops in there to protect profits," said analyst Bill Raffety at commodities futures brokerage Penson GHCO, referring to speculative investors, such as hedge funds, that had standing orders to close out positions once prices fell below certain levels.
Coffee for December delivery settled 8.6 cents, or 4.8%, lower at $1.7250 a pound on ICE Futures U.S.
Coffee futures have soared since June on fears that drought in Brazil, the world's biggest coffee grower, would damage its crop of highly sought arabica beans and leave world supplies unable to keep up with demand. But those concerns now appear overblown.
"Prices are very unjustified," said Tom Mikulski of Lind-Waldock in Chicago.
Now that Brazil is getting wetter weather and a global surplus is more likely, traders are quickly pulling back. Monday's session marked the fourth consecutive day coffee futures settled lower.
"October kicks off harvest season for Central America and Colombia," said James Cordier of Liberty Trading Group. "Supplies are not going to be huge, but they will be available this month."
He said prices could dip as far as $1.65 pound in the coming days should funds continue closing out long positions, essentially cashing in on bets that prices would rise.
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