Cocoa turned up a shade in choppy dealings as the US market made its first monthly gain in three months. Raw sugar was flat as US budget talks weighed on some markets.
March arabica coffee futures on ICE sank 5.80 cents, or 3.7 percent, to settle at $1.5060 per lb, after earlier falling 4.3 percent to a session low at $1.4960. This marks their second straight monthly loss, having dropped more than 15 percent in the past two months, the weakest two-month performance for second position contract since October 2011.
"There's little support underneath. Speculators are selling," said one US coffee dealer.
On Wednesday, the benchmark contract fell to a 2-1/2-year low, then reversed course and jumped on heavy short-covering.
On Friday, origin selling from top grower Brazil helped give the market an early negative tone as producers there were attracted to the strength of the US dollar against the Brazilian currency, the real, dealers said.
"Although the dollar is a bit weaker this morning against the major currencies, it's a bit stronger against the real," said one London-based broker, adding this encouraged producers in the world's biggest coffee exporter to sell while keeping prices low.
The Brazilian real has dropped more than 10 percent this year after several central bank interventions and steps to curb hot-money inflows.
When there was no followthrough to the short-covering that lifted the market earlier this week, speculators became heavy sellers and automatic sell orders were triggered, dealers said.
Investment funds have also been using the two-day price hike to square their books after taking a large short position.
So far this year, arabica futures are the weakest performer on the Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, having dropped more than 37 percent since the end of 2011.
January robusta coffee futures closed down $24, or 1.2 percent, at $1,914 a tonne.
Dealers said origin selling in Vietnam, where the robusta harvest is in full swing, limited upside potential in the market.
Certified coffee stocks held in NYSE Liffe nominated warehouses fell marginally to 108,490 tonnes as of Nov. 26, from 108,580 tonnes on Nov. 12, exchange data showed.
"People don't really need certified stocks. At the moment there's plenty of coffee coming directly from origin," said a European trader.
Cocoa prices turned marginally higher, recovering from earlier pressure in what appeared to a be a brief reaction to the International Cocoa Organization's (ICCO) estimate for a 2011/12 global cocoa supply surplus.
The ICCO estimated a surplus of 90,000 tonnes, reversing a previous forecast for a deficit of 19,000 tonnes.
Benchmark ICE March cocoa futures settled up $7, or 0.3 percent, at $2,498 a tonne. On the month, they finished up 4 percent.
"There's some origin-related selling and enquiries but there are no real buyers," a London-based broker said.
Liffe March cocoa futures finished up 1 pound at 1,586 pounds per tonne.
SUGAR RANGEBOUND
Technical analysts said the sugar market remained rangebound, struggling to break above resistance at the key 20-cent level, in the absence of any fundamental factors to move the market in either direction.
"Sugar hit the declining channel support which has been developing for a year. It is at 18.90/78," Societe Generale said in a commodities note.
"Short-term, 19.00/18.90 is also the lower limit of the recovery channel which has been forming for a couple of weeks. 19.55/63 must break for the rebound to continue to the channel upper limit at 20.10/20.20."
March white sugar on Liffe rose $2.80, or 0.5 percent, to close at $516.10 per tonne.