ICE arabica coffee futures fell on Friday as top producer Brazil's currency extended this week's sharp decline and funds scaled back net long positions. December arabica coffee fell 3.50 cents or 2.2 percent to $1.5835 per lb by 1511 GMT, extending a retreat from Tuesday's near two-year high of $1.76.
A sharp decline in Brazil's real currency has acted as a catalyst for a wave of fund liquidation of a near record net long position. "The tightness is really in robusta but arabica surprised everyone with its big upturn. That is being unwound somewhat right now," said Kona Haque, head of research at ED&F Man. The Brazilian real extended its slump for a third day on Friday, even after the central bank stepped up currency interventions amid lingering concerns over the win of US President-elect Donald Trump.
The currency weakened nearly 8 percent in the three sessions since Trump was elected, its worst three-day stretch since shortly after the Lehman Brothers collapse in 2008. Robusta coffee futures also fell as the harvest in Vietnam began to slowly gather pace. Vietnam's coffee harvest picked up this week after rain in key growing regions stopped, and could end a month earlier than usual as farmers seek to benefit from higher prices, traders said on Thursday.
Dealers said farmers may look to sell their coffee shortly after picking it to take advantage of current high prices. "You should see some harvest pressure kick in soon," Haque said. January robusta coffee was down $42 or 2.0 percent at $2,035 a tonne. The weakness of the real has also weighed on sugar prices with a pick-up in hedge selling anticipated as Brazilian producers seek to lock in high prices in local currency terms.
"The combination of high sugar prices in dollar terms plus the weakening of the real will encourage further hedging for next season's crop," said Sucden Financial senior trader Nick Penney, noting a similar trend had been observed in late 2015 when the real was under severe pressure. March raw sugar was off 0.05 cents or 0.2 percent at 21.60 cents per lb while December whites dipped $2.50 or 0.4 percent to $572.50 per tonne.
New York cocoa futures were higher on Friday, edging away from the prior session's three-year low. March New York cocoa rose $12 or 0.5 percent to $2,453 a tonne. The second month had dipped to a low of $2,422 on Thursday, its weakest since September 2013. March London cocoa futures fell 4 pounds or 0.2 percent to 2,007 pounds a tonne.