Arabica coffee futures on ICE slid as much as 5.3 percent in heavy volume on Tuesday on speculative long liquidation that triggered chart-based selling, slashing the bean's premium over robusta to a one-year low. Robusta coffee futures turned lower after rising to a 2-1/2-month high, while sugar and cocoa markets rose.
Arabica saw its biggest drop in three months. Traders said one speculator may have reduced a large long position, triggering heavy chart-based selling as the benchmark contract dropped below last week's lows and a long-term Fibonacci retracement level.
"You have long liquidation. Shorts are pushing them as they smell blood in water and you might have some guys moving longs over to London as chatter on fundamentals seems to be stronger for robusta," one US trader said.
Production in Espirito Santo, a major robusta growing state in Brazil, is expected to fall due to dry weather, which traders said helped lift robusta futures earlier.
ICE May arabicas settled down 7.65 cents, or 4.6 percent, at $1.5885 per lb, having fallen as much as 5.3 percent to a one-year low at $1.5760 per lb earlier in the session. Total volume exceeded 68,000 lots, more than triple the daily average.
The tumble slashed arabica's premium over robusta to below 66 cents per lb, down from around 74 cents on Friday and the lowest level in a year.
In addition to speculative liquidation, Rodrigo Costa, a broker with Societe Generale in New York, said: "Producers are just doing some 'house cleaning' ahead of the notice period for delivery against the March contract and that triggered the technical selling."
May robusta coffee futures touched their highest level since December 2 at $2,077 per tonne before reversing to close down $46, or 2.2 percent, at $2,020 per tonne.
ICE raw sugar futures turned higher in options-related dealings as the market readjusted after the US Presidents Day holiday on Monday.
ICE March raw sugar futures finished up 0.26 cent, or 1.7 percent, at 15.44 cents a lb, after trading in a wide range from 14.69 cents to 15.25 cents, the highest since January 28.
May white sugar ended up $4.70, or 1.2 percent, at $395.70 per tonne. ICE May cocoa futures closed up $11, or 0.4 percent, at $2,942 per tonne, while London May cocoa ended up 20 pounds, or 1 percent, at 1,997 pounds per tonne, the highest since January 20 for both markets.