NEW YORK/LONDON, March 7 (Reuters) – Arabica coffee futures plunged on Wednesday to a 16-month low on investor liquidation and suspected producer sales as the market posted its biggest three-day fall in a month.
The rest of the softs complex was mixed, with robusta coffee deriving support from the fact that growers in top robusta producer Vietnam were holding back supplies. A large crop in top producer Brazil also weighed on the market.
Some dealers believe the Vietnamese action is longer-term bearish because those beans will eventually have to come to market and they also point to a revision of the Indonesia’s coffee crop, which is due to start harvesting in April, to 9.2 million bags from an earlier forecast of 8.75 million.
The key May arabica coffee contract dropped to a session nadir of $1.862 a lb, lowest for the second position in the market since mid-October 2010, Thomson Reuters data showed.
May fell 4.45 cents or nearly 3 percent to close at $1.886 per lb.
London’s May robusta futures jumped $76, or nearly 4 percent, to finish at $2,031 a tonne, the highest close for the contract in 1-1/2 weeks.
“Part of it had to do with the market going through (the psychological level of) $2,” said The Price Group senior analyst Jack Scoville, adding pre-placed computer sell orders accelerated the fall in bean values.
James Cordier, chief trader of commodity brokerage Optionsellers.com in Florida, said he suspected “heavy” producer sales hit arabicas as Brazilians wary of a weakening economy opted to turn their assets into funds.
“They want to turn their beans into cash,” he said. “Brazil has been sitting on a lot of coffee.”
Traders said roaster interest should begin emerging at these levels. Cordier believes a floor near $1.80, basis May, is likely.