LONDON: Arabica coffee futures on ICE fell more than 2% on Wednesday, having hit a 3-1/2 week high in the previous session, as investor fears over frost risk in top producer Brazil began to fade.

COFFEE

July arabica coffee fell 3.5% to $2.1945 per lb by 1204 GMT, after hitting a 3-1/2 week high of $2.2935 on Tuesday.

Dealers said the latest weather forecasts indicate very little, if any, coffee and sugarcane crop damage is expected in southern Brazil from this week’s frosty weather.

Longer term though, the market remains on edge over frost risk in Brazil this season given frosts last year severely damaged the crop and sent prices to decade highs.

July robusta coffee fell 2.7% to $2,047 a tonne.

SUGAR

July raw sugar rose 0.3% to 20.08 cents per lb, having hit a one month high of 20.24 cents on Tuesday.

Dealers said funds are piling back into sugar on the view that it is still relatively cheap given rising energy, fertiliser, transport, and labour costs. Other commodities like grains are also rising strongly, they noted.

Higher energy and grains prices tend to lift the price of ethanol. This can tempt cane mills in top sugar producer Brazil to produce less of the sweetener and more of the biofuel.

August white sugar rose 0.3% to $556.70 a tonne.

COCOA

July New York cocoa fell 1.3% to $2,498 a tonne.

“Heavy rainfall has improved the prospects for the mid-crop that is currently underway in Ivory Coast, the world’s largest cocoa producer. This could mean the (previously expected) year-on-year crop shortfall will be offset,” said Commerzbank in a note.

July London cocoa fell 0.6% to 1,789 pounds per tonne.