Coffee futures dropped sharply as trading picked up following the long Thanksgiving weekend.
Arabica coffee for March delivery dropped 4.1% to $1.185 a pound on the ICE Futures U.S. exchange, the largest percentage drop in a month-and-a-half.
Several bearish factors for coffee compounded at once last week. Rains in Brazil, the world's largest growing region, became more widespread in previously dry areas, boosting production ideas. Colombia, the second-largest producer of the mild-flavored arabica bean, released data showing production is up over last year. Vietnam, the largest producer of robusta beans for instant coffee, is exporting at a faster rate than last year.
A strong dollar also weighed on commodities across the board.
"Usually coffee doesn't like to act before a long weekend," said Hernando de la Roche, senior vice president at INTL FCStone in Miami. "The market was very slow. People came back from the holiday and they started selling the market to be in line with what happened with the commodities last week."
Mr. de la Roche said a move downward in the Brazilian real against the dollar is also adding pressure to prices. The real was down 1.3% recently against the dollar, trading at a one-month low. When the real is weak against the dollar it encourages sales of dollar-denominated goods like coffee as producers take advantage of the favorable exchange rates to recoup higher profits in their local currency.
The U.S. Commodity Futures Trading Commission released data showing that hedge funds, speculators and other investors were shorting the market by the highest margin so far this year, with bearish bets outweighing the bulls by 27,700 contracts as of Nov. 17. ED&F Man's Volcafe said a bout of futures buying to cover short positions slowed losses.
In other markets, cocoa for March was up 1.1% to $3,347 a ton, raw sugar for March lost 1.1% to 14.80 cents a pound, March cotton dropped 0.5% to 63.64 cents a pound and frozen concentrated orange juice futures rose 0.3% to $1.4365 a pound.
Write to Julie Wernau at julie.wernau@wsj.com
Corrections & Amplifications
This item was corrected 12:35 p.m. ET because it misstated the dates covered by the CFTC data in the seventh paragraph.
Arabica coffee for March delivery dropped 4.1% to $1.185 a pound on the ICE Futures U.S. exchange, the largest percentage drop in a month-and-a-half.
Several bearish factors for coffee compounded at once last week. Rains in Brazil, the world's largest growing region, became more widespread in previously dry areas, boosting production ideas. Colombia, the second-largest producer of the mild-flavored arabica bean, released data showing production is up over last year. Vietnam, the largest producer of robusta beans for instant coffee, is exporting at a faster rate than last year.
A strong dollar also weighed on commodities across the board.
"Usually coffee doesn't like to act before a long weekend," said Hernando de la Roche, senior vice president at INTL FCStone in Miami. "The market was very slow. People came back from the holiday and they started selling the market to be in line with what happened with the commodities last week."
Mr. de la Roche said a move downward in the Brazilian real against the dollar is also adding pressure to prices. The real was down 1.3% recently against the dollar, trading at a one-month low. When the real is weak against the dollar it encourages sales of dollar-denominated goods like coffee as producers take advantage of the favorable exchange rates to recoup higher profits in their local currency.
The U.S. Commodity Futures Trading Commission released data showing that hedge funds, speculators and other investors were shorting the market by the highest margin so far this year, with bearish bets outweighing the bulls by 27,700 contracts as of Nov. 17. ED&F Man's Volcafe said a bout of futures buying to cover short positions slowed losses.
In other markets, cocoa for March was up 1.1% to $3,347 a ton, raw sugar for March lost 1.1% to 14.80 cents a pound, March cotton dropped 0.5% to 63.64 cents a pound and frozen concentrated orange juice futures rose 0.3% to $1.4365 a pound.
Write to Julie Wernau at julie.wernau@wsj.com
Corrections & Amplifications
This item was corrected 12:35 p.m. ET because it misstated the dates covered by the CFTC data in the seventh paragraph.
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