By Julie Wernau

Coffee futures dove lower Thursday on tract for a protracted bull back after the contract reached above several technical averages, encouraging speculators to take profits.

Arabica coffee for December delivery lost 3.3% to $1.6445 a pound on the ICE Futures U.S. exchange.

"We've had a very big run over the last few months. Coffee got very extended on a technical level, way above all normal metrics," said Adam Sarhan, chief executive of 50 Park Investments.

Mr. Sarhan is bullish coffee in the near-term but said he pulled out of the market several days ago over concerns about what risk the outcome of the U.S. presidential election would bring to the markets. Now, he said, he plans to buy the next bounce in the contract following the dip with the hopes of riding momentum trading higher.

Coffee has become a favored bet recently among hedge funds and other money managers. As of last Tuesday, bullish bets outweighed bearish ones by the highest margin so far this year, at 56,863 contracts and bets by speculators in the market were also at their highest so far this year, according to U.S. Commodity Futures Trading Commission data.

The markets has been largely driven by concerns over the supply of the more acerbic robusta bean, typically found in instant coffee and cheaper blends. A post-election sell off in the Brazilian real hasn't helped the rally however. Brazil, the largest growing region, tends to increase its sales when the real is weak against the dollar so that producers there can recoup more reais for their dollar denominated goods.

The International Coffee Organization said Thursday that growing speculation over the size of the 2017/2018 crop is adding to price moves, as the arabica crop will be going into an off year in its biennial cycle, lowering supplies at a time when robusta crops have been hurt by drought, leaving less coffee to substitute into those blends.

In other markets, raw sugar for March dropped 1.9% to 21.67 cents a pound, cocoa for March was down 1.1% at $2,425 a ton, frozen concentrated orange juice was up 1% at $2.183 a pound and December cotton rose 1.8% to 69.51 cents a pound.

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

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November 10, 2016 11:16 ET (16:16 GMT)

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