Arabica coffee futures on ICE on Friday retreated toward the 16-month low set last week as prospects of a record global crop in 2012-13 threw the market on the defensive. May arabica dropped 3.20 cents or 1.7 per cent to close at $1.862 (Dh6.83) a pound. The session low was at $1.856, just a hair above the $1.851 hit on Thursday, the lowest level for the second month since mid-October 2010. Prices have fallen nearly 40 per cent from peaks hit in May 2011 as the prospect of a much larger global crop in 2012-13 has helped to ease concerns about tight supply and dampen investor appetite for the commodity. \"The market is now well off those [2011] highs and there has been a growing feeling as 2012 progresses that there is currently more downside potential than upside for the market given the prospect of a return to world surplus in 2012-13,\" said Andrea Thompson, analyst at CoffeeNetwork, a subsidiary of INTL FC Stone. World coffee production was projected to rise to a record 146 million (60kg) bags in 2012-13, up 11 million bags from 2011-12, Thompson said in a report. \"Given the outlook of a record crop in Brazil, financial investors are betting on falling prices and are thereby contributing to the price slide,\" Commerzbank said in a report. \"In view of the continued tight supply, we regard the price slide to below the $2 per pound mark as unsustainable and expect arabica prices to recover in the coming months,\" it added. International Coffee Organization head Roberio Oliveira Silva also said on Thursday the he did not see the fall in prices continuing due to growing demand. Dealers said there may be scope for a short covering rally in the near future. Country Hedging analyst Sterling Smith said the softs complex will continue to be influenced by developments in global markets.