World coffee prices plunge as volatile trading rattles markets

Coffee prices on the ICE exchange fell sharply on Friday, with arabica coffee down as much as ​8% in volatile trade, after the bean recorded its fourth-largest daily price gain ‌on record at the start of the week.

Cocoa prices plunged 10% ​earlier, though both coffee and cocoa remained on track for strong ⁠weekly gains.

Market participants said a rush of speculative money looking for a home hit soft commodities on Monday, tempted also by concerns the El Nino weather pattern will ‌strengthen and lead to increasingly adverse weather in key growing regions.

The ICE exchange then raised its margin, or down payment, requirements for ‌coffee and cocoa futures contracts, limiting the amount of liquidity in the ‌market ⁠and in turn increasing price volatility.

"There's a vacuum of liquidity (and) a ⁠lot of these speculators are trading the intraday. They are out by (the market) close," said a coffee analyst at a multinational agri-commodities trade house.

At 1536 GMT, ICE arabica coffee futures were ​down 3.5% at $335.50 per lb, having closed ‌up 12.3% on Thursday. The contracts, which skyrocketed 16% on Monday only to collapse on Tuesday, were still heading for 11% weekly gains.

ICE robusta coffee futures fell 5% to $3,842 a metric tonne, but were headed for ‌3% weekly gains.

The U.S. Climate Prediction Center has forecast an 81% chance ​of a very strong El Nino during October-December that would rank among the largest El Nino events in the historical record.

Dealers ⁠said El Nino-linked excess rains in top grower Brazil had slowed over the past couple of weeks, however.

London cocoa futures were down 5.2%at £4,551 a tonne but ‌were heading for 20% weekly gains after hitting eight-month highs on Thursday, while New York cocoa futures fell5.5% to $6,102 a tonne.

El Nino is especially worrisome for cocoa as it disrupts weather patterns in No. 3 grower Ecuador as well as in West Africa, where some 70% of the world's chocolate ingredient is grown.

Cocoa futures nearly tripled in 2024 after the West African harvest failed amid ‌an El Nino weather pattern that ran from mid-2023 to mid-2024 and was considered a ​moderate-to-strong occurrence.

Top cocoa grower Ivory Coast's upcoming 2026/27 main crop is expected to drop more than 10% amid excess rains, disease ⁠and insufficient crop care, pod counters and exporters based in the country said.

"Cocoa market appears ⁠to be unstoppable this week against a backdrop of poor pod counts and El Niño," said a dealer. He added, however, that the ‌rally has been "dominated by speculative activity".

In other soft commodities traded, raw sugar was down 1.6% at 14.88 cents per lb, having hit a near ​two-month high on Wednesday, while white sugar fell 2.8% to $465.40 a tonne.