By Julie Wernau 
 

Coffee futures slumped Wednesday despite a bullish coffee forecast out of Brazil as traders weighed slumping demand against fewer beans.

Arabica coffee for March was down 0.5% to end at $1.492 a pound on the ICE Futures U.S. exchange, slipping back into a tight trading range it has held for a week.

"The market has rallied a lot and now seems unsure of the next move," said Jack Scoville, vice president of Price Futures Group in Chicago.

The market struggled for direction in early trading Wednesday morning, said Sucden Financial, which highlighted that prices could drop to $1.47 or even $1.42 a pound if the market isn't able to move higher and take out a 40-day moving average that would signal buying.

On Tuesday, Conab, the crop forecasting agency in Brazil, the world's largest coffee producer, said it predicts a crop of between 43.7 million and 47.5 million bags this season versus 51.4 million bags a year earlier, with most of the drop attributable to the mild arabica bean.

Commerzbank pointed out, however, that the arabica crop is entering a "low yield" year, in which fewer beans are usually produced as part of a natural two-year cycle. The firm said the crop would be quite large for a low-yield year, the second highest on record.

Global coffee demand is set to fall by 0.4% to 155.1 million bags, according to the International Coffee Organization.

In other markets, raw sugar for March was up 1.2% to settle at 20.98 cents a pound, cocoa for March lost 0.1% at $2,233 a ton, frozen concentrated orange juice dropped 2.2% to close at $1.6975 a pound, and March cotton was up 0.2% to settle at 72.26 cents a pound.

Write to Julie Wernau at julie.wernau@wsj.com

(END) Dow Jones Newswires

January 18, 2017 16:52 ET (21:52 GMT)

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