Photographer: Taylor Weidman/Bloomberg

Robusta Coffee Extends Plunge That Caught Hedge Funds Unaware

  • Beans head for biggest five-day slump in half a decade
  • Hedge funds’ bullish bets were near a record before drop began

Robusta coffee’s biggest plunge in half a decade took hedge funds by surprise.

The beans, used in instant coffee, are heading for the largest five-day slide since July 2011 in London. The drop began a day after hedge funds were near the most bullish on record and has continued even as a technical measure indicated prices were oversold.

While the market is facing a third annual shortage, more supply from key growers has eased concerns about short-term tightness and cut price gains in the past year to 22 percent. The slump over the past week pushed prices below both the 100-day and 200-day moving averages, levels often used by traders to predict future moves. Robusta’s 14-day relative-strength index has fallen to about 19, signaling prices may have dropped too fast.

“The robusta bull market could be over for the rest of the year,” Carlos Mera Arzeno, a commodities analyst with Rabobank International in London, said by email. “The price is falling due to a combination of fundamental and technical reasons. You have large non-farmer stocks in Vietnam and Indonesia, and also funds selling, regardless of the fundamentals.”

Robusta for July delivery lost 1.5 percent to $1,907 a metric ton by 5:17 p.m. in London. Prices are down 13 percent in the past five days and reached the lowest since September.

While hedge funds reduced their bets on higher robusta prices by 4.6 percent in the week to April 18, they were still near the most bullish on record, ICE Futures Europe data show.

“Funds that are still long will be hit, and those funds tend to be fundamentals based,” Arzeno said.

In New York, arabica coffee added 0.6 percent to $1.327 a pound. The variety, favored for specialty drinks such as those made by Starbucks Corp., slumped 9.4 percent in the previous four days.

In other soft commodities, cocoa rose 1.8 percent to 1,450 pounds ($1,862) a ton in London, rebounding from an earlier decline. In New York, the commodity climbed 2.1 percent. It touched the lowest in almost a decade on Thursday.

White sugar lost 0.1 percent to $468.60 a ton in London. Raw-sugar futures in the U.S. retreated 0.3 percent, extending Monday’s 1.2 percent decline.

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