BLBG : Coffee Falls Most in Three Months as Dollar Gains; Cocoa Drops
Coffee prices fell the most in more than three months as the dollar rallied, reducing the appeal of commodities as inflation hedges. Cocoa also dropped.
The dollar rose as much as 1.3 percent against a basket of six major currencies, increasing the cost of commodities in New York for overseas buyers. The Reuters/Jefferies CRB Index of 19 raw materials fell to the lowest level since Sept. 8, led by orange juice and coffee.
“It’s currency-related, and the macro view” is pushing coffee lower, said Byron Barrios, an East Coast Options Services Inc. trader in New York. “Crude is down.”
Arabica-coffee futures for December delivery fell 7.1 cents, or 5.2 percent, to $1.293 a pound on ICE Futures U.S. in New York, the biggest one-day drop for a most-active contract since June 15.
Investors and traders following chart patterns also are selling coffee after prices failed to top a five-week high of $1.383 reached on Sept. 21, Barrios said.
Coffee has climbed 15 percent this year as supplies tightened from Central America and Colombia, the largest producer of arabica varieties after Brazil.
On London’s Liffe exchange, robusta coffee for November delivery fell $77, or 5.2 percent, to $1,400 a metric ton. The price earlier touched $1,391, the lowest for a most-active contract since Aug. 27. The drop was the biggest since June 19.
Markets Pull Back
“Coffee was just a part of the macro scene today as the Fed and other central banks said they would begin to scale back short-term dollar infusions, seeing the dollar strengthen and stock markets slide along with much of the commodity complex,” Ralph Hawes, a coffee-desk manager at Sucden Financial Ltd. in London, said in a report.
Major equity indexes fell in Europe and New York. The Standard & Poor’s 500 Index dropped 1 percent and the Dow Jones Industrial Average of 30 stocks touched 9,666.03, the lowest value since Sept. 15, before closing down 0.4 percent.
The U.S. Federal Reserve said it will further reduce emergency programs aimed at easing the credit crisis. By curtailing auctions of cash loans to banks and Treasury securities to bond dealers, the Fed will trim the value of the initiatives to $100 billion by January from $450 billion.
The European Central Bank plans to curtail a program to lend dollars to banks for as much as 84 days by the middle of next month, while loans of up to seven days will be offered until January. The bank cited “limited demand” for longer-term loans and “improved conditions in funding markets.”
In another ICE market, cocoa futures for December delivery fell $89, or 2.8 percent, to $3,066 a ton in New York, the biggest drop for a most-active contract since Aug. 27. The price has risen 15 percent this year amid predictions for a third- straight global-production deficit.
