SOFTS-Arabica sinks below two-yr peak, robusta down from 1-yr high
* Analyst sees Brazil coffee output down in 2014/15 * ICO warns of possible coffee deficit * Raw sugar drops after spread widens (Recasts first paragraph, updates closing coffee/sugar prices, adds CRB information) By Marcy Nicholson and David Brough NEW YORK/LONDON, March 4 (Reuters) - Arabica coffee futures on ICE dropped 4 percent on Tuesday, tumbling from the prior session's two-year peak on profit-taking, which accelerated in late-day dealings, while Liffe robusta turned lower after tapping a one-year high. ICE Futures U.S. raw sugar also gave back the previous day's gains, while firm demand lifted cocoa in both New York and London. Arabica coffee prices maintained the volatility held for more than a month as the market is up 64 percent so far this year on concerns over the impact from a drought in Brazil in the coming 2014/15 crop. It is by far the strongest performer on the 19-market Thomson Reuters/CoreCommodity CRB Index, followed by 30 percent gains in lean hogs. ICE second-month arabica futures finished down 8 cents, or 4.2 percent, at $1.8545 per lb, after trading widely from $1.9760 to $1.8430. The weak session comes after arabica futures soared to a two-year high on Monday, soaring nearly 10 percent to $1.9780, causing traders to expect the market to breach the psychological $2 level. "Every bull market needs a little cleansing," said Nick Gentile, senior partner of commodity trading consultancy Atlantic Capital Advisors. The market ignored bullish forecasts. The International Coffee Organization expects the world coffee market will switch into deficit in 2014/15 if a drought in Brazil continues. Analyst Stefan Uhlenbrock of F.O. Licht forecast Brazil's coffee output would fall by around 5 million 60-kg bags to 48 million bags in 2014/15. "Markets are taking a 'worst case' view of the situation, which does leave some downside potential if the damage turns out to be not as bad as expected," said Tom Pugh, commodities economist with Capital Economics in London. "Official data releases could cause big swings in the market. People are really on edge." ROBUSTA COFFEE TAPS 1-YEAR HIGH Second-month Liffe robusta coffee closed down $21, or 1 percent, at $2,077 per tonne, after rising to a one-year high at $2,136 as farmer selling in Vietnam's Central Highlands belt slowed. [ID;nL3N0M11LB] Robusta futures followed arabica lower, and its discount to arabica KC-LRC1=R rose to 94.7 cents per lb, the highest since July 2012, from 90.46 cents on Monday. ICE raw sugar futures were lower as some short-term traders liquidated their long positions, dealers said. May sugar settled down 0.06 cent, or 0.3 percent, at 17.74 cents a lb. "The general chat around the trade seems to be of a negative tone with a consensus of scant underlying physical buying and the collapse of the March/May on expiry night (Friday) indicating the potential weakness of the market," said Thomas Kujawa, co-head of the softs department at brokerage Sucden Financial Sugar. May white sugar futures on Liffe fell $1.30, or 0.3 percent, to settle at $476.50 per tonne. ICE May cocoa futures closed up $38, or 1.3 percent, at $2,956 per tonne, underpinned by expectations of a global deficit and firm demand. May cocoa futures on Liffe ended 19 pounds higher, or 1 percent, at 1,844 pounds a tonne. ($1 = 0.5982 British pounds) (Editing by Susan Fenton, Jane Baird, Sofina Mirza-Reid and Andrew Hay)
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