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CSCE cocoa breaks down to close sharply lower

NEW YORK: CSCE cocoa futures took a nosedive on Thursday afternoon as active May closed back under $800, taking a hammering from speculative, origin and trade selling, dealers said.

"It's still disappointing. We start to rally and the market doesn't hold. I think the fundamentals are still very weak," Scott Meyers, technical analyst with Pioneer Futures said.

"Everytime you get up to a technical area where it starts to look promising, the market starts to break right back down."

Active on May closed down $15 at $791 a tonne, having plummeted $42 from a 3-1/2 week, intraday high of $833. It traded down to $785. Spot on March cocoa lost $2 to $767 and the rest of the board fell by $14-$17 a tonne.

Bean prices marched higher on the opening bell, filling a gap in the May contract in the $823-825 area, as local and speculative buying triggered stops, dealers said.

"There were rumours about the (Ivory Coast port) strike and locals started getting long. Spec buying and stops getting touched off pretty much covered the volume on the way up," one floor dealer said.

"It looked so good this morning. But when the market got up to the thirties in the May, origin offers were coming in left and right," one broker with a trading house said.

"Then the specs stepped in and started to sell. That started the domino effect."

Dealers said that trade selling chased the market lower and as prices fell through their opening level, "that's where you saw a whole pile of sell stops taken out".

More stops were triggered, just before the market closed, underneath $792 (basis May), they added. "The market looks horrible," one said.

Some dockers with army protection resumed work at Ivory Coast's main port of Abidjan, but a wildcat strike continued to paralyse most operations, port sources said on Thursday.

The dockers called the three-day strike on Wednesday, frustrated with both the employers and their unions.

Traders and analysts said that growing expectations within the market that top producer Ivory Coast's 1999/2000 crop would come in at around 1.3 million tonnes were weighing heavily on sentiment.

"It's really the wrong time of year for a rally, there's still cocoa coming out. The reason why the market can't rally is because they're still hedging it," one trader said.

Arrivals of cocoa beans into Ivory Coast ports are now well ahead of arrivals at the same period last year. Industry sources said on Wednesday that 1999/2000 cumulative arrivals stood at 1.0 million tonnes by on Feb. 20.

"I have a database of arrivals for the previous four years and the average figure for that particular week in February was less than 20,000 tonnes," one trader told Reuters.

Final volume in cocoa on Thursday was estimated at 13,014 contracts, compared to official turnover on Wednesday of 3,467 contracts.

Traders pegged support in CSCE on May at $773-775, whilst nearby resistance was seen at $833 and $848.

The CSCE is a subsidiary of the New York Board of Trade.-Reuters