Forexpros – Coffee futures tumbled to a three-week low on Monday, as a broadly stronger U.S. dollar coupled with receding concerns over Vietnam’s coffee harvest weighed on prices.
On the ICE Futures Exchange, Arabica coffee for December delivery traded at USD2.2890 a pound during early U.S. morning trade, tumbling 2.25%.
It earlier fell by as much as 2.63% to trade at USD2.2765 a pound, the lowest price since October 12.
Coffee’s losses came as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied 1.19% to trade at 76.11.
The greenback’s gains came after Japanese officials launched an intervention to curb the appreciation of the yen after the dollar fell to a record low of JPY75.56 in early trade Monday.
Japanese Finance Minister Jun Azumi said Tokyo had acted on its own and would keep intervening until it was satisfied with the results. Vice Finance Minister Fumihiko Igarashi added that it was still too early to assess the impact of the action, which may not yet have ended.
A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.
Coffee prices came under additional pressure after leading industry group Volcafe said that it expected Vietnam to produce a record 22 million bags of 60 kilograms in the 2011-12 marketing season.
The Southeast Asian nation, which is the world’s second largest grower and exporter of the bean, harvested 22 million bags of coffee in the previous marketing year.
Agribusiness financial service provider Rabobank said in a report that, “expectations of large crops in Vietnam in the fall and Brazil next year as well as possible selling by producers should pressure prices lower”.
Elsewhere, on the ICE Futures Exchange, cotton futures for December delivery dropped 1.63% to trade at USD 1.0267 a pound, while sugar futures for March delivery fell 0.95% to trade at USD0.2602 a pound.
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