Coffee futures were diving hard on Tuesday, backing off their highest values in 30 days as investors and traders became jittery in anticipation of Wednesday's euro zone meeting to put the final touches on the region's emergency bailout fund, published reports state.
An air of confidence and optimism for leaders' finalization of the European Financial Stability Facility has given way to tension and nerves as leaders prepare for the second summit in four days, according to Reuters. Regional finance ministers have postponed the meeting but leaders from the European Union and the region still intend to convene for the summit, the wire service reports, citing information from a spokesman for the European Union.
Overbought positions continued pulling Arabica coffee futures away from their highest prices in one month, but inclement weather for Central America is forecast to continue. Farmers saw losses to coffee trees and roads destroyed by two-weeks-worth of rain.
"The rains will likely cause some delays in the crop," a London-based coffee futures dealer told Reuters, also noting damage to coffee crops will be minimal.
Damage to coffee crops is stronger in Southern Mexico because of heavy rain during the past seven days, a meteorological service reports.
Arabica coffee for December delivery dropped slightly more than 5 cents to $2.4575 per pound. Robusta coffee for January delivery fell $3 to $1,928 per ton.
Investors capitalized on the profits from coffee futures notching their highest price in one month by locking in profits, according to ForexPros.com. The soft commodity's losses on Tuesday mark the first retreat in 72 hours.
Coffee futures' recent performance, prior to Tuesday, has been bullish. Since this past Friday, coffee futures had increased nearly 8 percent, to include Monday rises of 2 percent.
Following Monday's performance, coffee prices touched $2.5235 per pound, the soft commodity's top price since September 21.
Inclement weather also touched additional sources for coffee, ForexPros reports. Heavy rain damaged prospects in South America while Thailand's ongoing flooding issues continued raising concerns about losing supplies.
Bloomberg reports the rains have been so bad in Colombia, the globe's second-largest grower of Arabica coffee beans, that this year's crop projects to be the smallest in two years.
A board member with the National Federation of Coffee Growers told the news service that production is likely to fall to less than 8.5 million bags for 2011. The Colombian trade advocacy group in August slashed projections from 9.5 million bags to 9 million, a significant reduction when considering production for 2010 was 8.9 million bags.
"Output could be hit mainly because of the weather. Production isn't responding. Coffee like no other product needs light," Mario Gomez told Bloomberg last Friday, also noting the benefits of dry weather.
The past 12 months have seen coffee futures climb 25 percent in value, largely attributable to reduced production in Colombia. Starbucks and Dunkin' Brands, two of the U.S.' biggest brewers of beans from Colombia, are likely to see their inventories lessen because of Colombia's heavy rain.
A Minnestoa-based analyst told the news service that smaller crop production from the South American nation prompts worries about reduced inventories.
"There's nervousness about beans in the market that's starting to affect the price," Sterling Smith of Country Hedging told Bloomberg. "It means we will still be short beans."
ForexPros reports markets, analysts and investors are hoping the EFSF finds success on Wednesday, despite the finance ministers' cancellations.
German Chancellor Angela Merkel, leader of the nation hosting the region's biggest economy, said her opposition to the policy of the European Central Bank buying bonds in the secondary market is steadfast, according to ForexPros.
Germany's opinion on topics European typically holds large weight as the nation serves as a pacesetter.
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