MILAN – Arabica coffee futures fell almost 7 percent on Monday as forecasts for beneficial rain in the Brazilian coffee belt triggered heavy long liquidation. The benchmark contract for December delivery closed 940 point down at 123.05 cents, the lowest level since the third decade of August.
Coffee-growing regions of Brazil will receive 20-35 mm of rainfall in the week starting Sep 20, according to Somar Meteorologia.
Dealers said the forecast ignited sell stops among financial investors that had built a large long position in Arabica coffee futures in New York recently.
Friday’s Commitment of Traders (COT) report showed that funds boosted their net-long positions in ICE Arabica coffee futures by 5,866 contracts to a 4-year high of 48,450 contracts as of September 8.
“Once the news on Brazil rains came in and funds started selling, sell stops were hit and the market went down,” a broker was quoted as saying by Reuters news agency.
Coffee prices surged to 8-1/2 month highs September 4 on concern that excessive dryness in Brazil could undermine coffee yields in the next coffee season.
The main flowering of Brazil’s Arabica coffee crop typically occurs in a few waves from late September through November. If these flowers, which are vulnerable to dry spells, abort in the coming months, it will sap trees’ potential to produce.
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