March 12, 2012 / 5:16 PM / 5 years ago

Arabica coffee hits 17-month low, raw sugar off lows

NEW YORK/LONDON (Reuters) - Arabica coffee futures slid to a 17-month low on Monday, extending a prolonged downward trend after marking its weakest week in nearly six months, on origin selling and long liquidation, as raw sugar moved up after tapping a one-month low.

Robusta coffee on Liffe also tumbled on heavy producer selling while cocoa gave back the previous session's gains, joining a retreat in crude oil and many other commodity markets as investors eyed slowing growth in China and Europe.

May arabica futures fell 2.10 cents, or 1.2 percent, to $1.8410 per lb by 1:05 p.m. EDT (1705 GMT), after hitting $1.8105, a 17-month low for the second month.

"Everyone's selling. Central America I believe has been in the market. Brazil's been in the market," said Nick Gentile, chief trader for commodity firm Atlantic Capital Advisors in New Jersey. "The trend-following funds are selling."

Arabica coffee prices on ICE have fallen around 40 percent from peaks hit in May 2011 as prospects of a global surplus in 2012/13 ease concerns about supply tightness and dent investor appetite for the commodity. Last week, the benchmark second-position contract tumbled below the 61.8 percent Fibonacci retracement level at roughly $2 per lb, attracting technically based long liquidation, dealers said.

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Graphic on arabica technical levels:

link.reuters.com/des96s

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"On expectations of that supply reducing prices, we've seen a lot of origin selling - Brazilians clearing space for their next crop as well as other ones trying to take advantage of $2 per lb arabica prices while they last," said Keith Flury, analyst at Rabobank.

"There was a little bit of a rush to the door to sell and that prompted technicals to look rather bearish, which probably brought in some speculators and spurred that on a little bit more," he added.

The May robusta contract on Liffe dropped $28, or 1.4 percent, to $2,022 per ton, after sinking 2.6 percent earlier to $1,996.

Dealers said Vietnam, the world's largest robusta producer, could unload more beans to the physical market this week on worries that London futures may fall further because of the prospect of a record global crop.

May's premium to July weakened to around $29, down from $46 at the close on Friday.

Flury said while coffee prices could fall further in the short-term, the frost season could give the market a boost.

RAW SUGAR TURNS HIGHER

Raw sugar prices recouped the day's sharp losses.

Prospect of a large center-south crop in top producer and exporter Brazil is kept the market on the defensive for most of the session, analysts said.

"I think we'll stay here for a while and if there is really a large Brazilian (sugar) crop, we can go under 20 cents," said The Price Group analyst Jack Scoville.

More pressure can also come from market ideas that the sugar crop in India, the world's No. 2 producer, will again exceed 20 million ton in the 2012/13 season.

India's sugar exports has already placed prices under the gun the past few weeks, traders said.

May raw sugar on ICE rose 0.06 cent, or 0.3 percent, to 23.72 cents a lb after earlier trading as low as 23.26 cents.

Dealers said supplies remained ample with most analysts expecting a second consecutive global surplus in 2012/13.

London May white sugar futures jumped $7.40, or 1.2 percent, to $632.90 per ton.

Cocoa prices were modestly lower.

The market was increasingly focused on mid-crop quality and weather in West Africa, noting the current conditions appeared generally beneficial, dealers said.

Farmers and analysts said Ivory Coast's cocoa growing regions received a good mix of sun and rain last week, improving prospects for the April-to-September mid-crop harvest.

May cocoa on ICE dipped $21, or 0.9 percent, to $2,389 a ton, while May cocoa on Liffe fell 7 pounds, or 0.5 percent, at 1,549 pounds a ton.

The opening times for ICE coffee and cocoa futures, and the settlement window for cocoa are delayed through March 23, due to the start of Daylight Savings Time in the United States. For detailed information: r.reuters.com/wus96s

Additional reporting by Nigel Hunt in London and Rene Pastor in New York; Editing by Anthony Barker and Lisa Shumaker

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