NEW YORK/ LONDON: Arabica coffee prices sank to 6-1/2 year lows and teetered on the brink of $1 per lb on Wednesday as investors continued to bet on lower prices due to expectations of record crops in top-growers in South America, while cocoa eased from the previous day's spike.
Building on the relentless selling of the past three weeks, benchmark December arabica coffee futures on ICE settled down 1.9 percent at $1.015 per lb, having earlier touched 1.010, its lowest since March 2007.
Traders eyed $1 as the next level of support, although some predict prices will test mid-90 cents before finding resistance. The front-month has not breached $1 since September 2006.
"Brazilian sales continue to be main pressure on the market," said James Cordier, founder and president of Liberty Trading Group in Tampa, Florida. "As far as we can tell, Brazil is more than happy to sell at this level, moving coffee to make way for next year's production," he said.
Brazil's crop could reach an estimated 60 million bags of coffee next year, a record after this year's low-yielding harvest, analysts said.
Robusta coffee also struggled to find support, sinking to fresh 3-1/2 year lows as the market shrugged off rains in top-grower Vietnam. The January contract settled down $22, or 1.5 percent, at $1,454 a tonne.
Based on their Relative Strength Index readings under 20, both robusta and arabica were technically oversold and vulnerable to a technical correction, traders said.
"But without something fundamentally changing the direction of the market, any technical bounce, in my opinion, would be short-lived," said Hector Galvan, senior softs broker at RJO Futures in Chicago.
COCOA EASES
Cocoa futures steadied after spiking more than 3 percent on Tuesday, while raw sugar prices eased.
ICE March cocoa settled down $2, or 0.07 percent, at $2,743 a tonne with the market consolidating after the previous day's steep advance of more than 3 percent on chart-based buying.
"The market overshot things yesterday and buying was a little too aggressive," said Sterling Smith, a futures specialist at Citigroup in Chicago. Cocoa arrivals at ports in top grower Ivory Coast reached 1,476,868 tonnes for the 2012/13 season that ended on Sept.
30, roughly in line with last season's 1,485,882 tonnes, according to Finance Ministry figures seen by Reuters. This was an upward revision from previous expectations for 2012/13 arrivals. March cocoa on Liffe eased 3 pounds, or 0.2 percent, to 1,735 pounds a tonne.
In sugar, ICE March futures were 0.16 cent, or 0.9 percent, lower at 18.10 cents a lb as traders awaited the latest US Commitment of Traders report.
Dealers estimated funds had sold between 30,000 and 40,000 lots in the week ended Oct. 29. Traders worry long fund positions could trigger further technical selling.
"I would suggest 17.70, 17.60 (cents a lb) is the bottom end of the market for the time being," a trader said. December white sugar on Liffe edged down $3.50, or 0.7 percent, to $480 a tonne.
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