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CSCE cocoa closes lower as trade/arb sell

NEW YORK: CSCE cocoa futures settled lower on Monday, coming under pressure from arbitrage and trade selling, sparked by local liquidation, traders and brokers said.

"I would expect this weakness through the next four to eight weeks maximum, due to the pressure from the Ivory Coast," one trader said.

Active March cocoa fell $14 to finish at $839 a tonne, trading between $855-$838. May lost the same to end at $866, whilst back months fell $13.

Bean prices opened down, but above market expectations thanks mainly to an initial absence of speculative selling, traders said.

Liquidation from the ring attracted trade and arbitrage selling, with one broker adding that "more disappointed specs (speculators) kicked out aswell".

"More or less it was arbitrage selling into buying. There was some commission house buying, but trade and arb (arbitrageurs) kept it in check," one broker said.

Traders and analysts said that with top producer Ivory Coast continuing to flood the market with cocoa, there was little chance that prices would rally much.

"The Ivory Coast (producers) are selling their cocoa and the market's absorbing it, so until they're well sold, we're going to stay around the (8)20's. When they're done, we're going to move up, so it's just a matter of time now," one floor dealer said.

One New York-based commodity trader said that shippers were moving cocoa out of Ivory Coast as quickly as possible due to the current political situation.

"A lot of people want to move it as fast as they can. They see it as unstable and don't want to give any chance for something to happen," he said, pegging port arrivals at 635,000 tonnes as of January 2, with 335,000 tonnes shipped up to the end of December.

Ivory Coast was calm during the weekend, after some post-coup jitters late last week raised tension two weeks after a military coup in the traditionally stable country.

Ivory Coast cocoa exporters are working at full capacity with the 1999/2000 crop season in full swing and the sector thriving to make up for marketing delays caused by farmers' protests, a military coup and Christian and Moslem holidays.

Cumulative arrivals of cocoa beans in ports since the start of the season (Oct-Sept) are estimated at 550,000 tonnes by January 2, down on 628,000 tonnes around the same time last year.

In other news, German cocoa grind figures for the fourth quarter of 1999 fell by 2.2 percent to 51,319.8 tonnes, compared to the year-earlier period, the German Confectionary Association BSDI said on Monday.

Both the Dutch and UK fourth quarter grinds rose in contrast to expectations of a flat result.

U.S grinding figures for the fourth quarter are due to be released on Jan 21.

"Cocoa prices continue to trend lower. It still appears there is some downside left in this market, though it may be limited," softs analyst with Salomon Smith Barney said in a recent report.

Technically, chartists pegged nearby resistance for March CSCE cocoa at $850-55, then 867-70, while nearby support was seen at $839-35, followed by $824-20, then all the way down to $804-800.

Volume traded reached an estimated x,xxx lots against the previous official volume of 7,451 lots.

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