By Julie Wernau

Coffee futures had their sharpest decline in more than four months Tuesday as traders made bets on how the outcome of the U.S. presidential election would affect demand for commodities.

Arabica coffee for December delivery fell 3.9% to end at $1.675 a pound on the ICE Futures U.S. exchange, its first fall in five sessions and the steepest decline for the most active contract since June 24.

After trading in a range for much of the year, in the lead-up to the election, arabica coffee futures have become a favored bet among speculators. The contract is up 12% since the beginning of October.

"The coffee market is the subject of a speculative frenzy," said Carlos Mera,a senior commodities analyst at Rabobank.

In the case of a win by Republican presidential candidate Donald Trump, coffee market speculators are counting on the rise of the euro.

Europe is the largest consumer of coffee and a stronger euro is seen as strengthening demand for coffee.

The same isn't true in all commodity markets. In the sugar market, for instance, the European market is protected and a stronger euro would be unlikely to affect prices.

David Martin, managing member of hedge fund Martin Fund Management, said Tuesday's move lower in coffee shouldn't be interpreted as traders betting on a win by Democratic presidential candidate Hillary Clinton but rather as money managers "taking money off the table" as they await the outcome of the election.

In other markets, cotton futures for December lifted 0.4% to end at 68.75 cents a pound. Analysts surveyed by The Wall Street Journal ahead of tomorrow's monthly update from the federal government regarding world supply and demand for various commodities are expecting lower U.S. cotton production and higher exports, lowering stockpiles of the fiber.

Analysts on average said the U.S. would produce 15.98 million bales of cotton this year, export 12.1 million and leave 4.24 million in stocks versus production of 16.03 million bales anticipated in October's federal forecasts, exports of 12 million and ending stocks of 4.3 million.

Raw sugar for March dropped 1.4% to settle at 21.97 cents a pound, cocoa for March was up 0.8% to settle at $2,465 a ton, frozen concentrated orange juice futures for January fell 2.9% to close at $2.1565 a pound and December cotton bounced higher, up 0.4% at the close to settle at 68.75 cents a pound.

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

(END) Dow Jones Newswires

November 08, 2016 15:02 ET (20:02 GMT)

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