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Cocoa rises on spec buying

NEW YORK: CSCE cocoa futures closed slightly higher on Friday, as speculative buying eased earlier pressure from arbitrage selling, with little reaction to sharply higher-than-expected U.S. fourth-quarter cocoa grind data, traders and brokers said.

"They were ostensibly very bullish because they were up so much more than the five percent that had been expected. However, overall the yearly grind figures from Western nations was down about one percent, so I would say that they will be well discounted by early next week," Ann Prendergast, softs analyst with New York brokerage Refco Inc. said.

Active March cocoa closed $8 higher at $861 a tonne, trading between $865-$848. May rose $7 to end at $889, whilst back months all gained the same, with the exception of September 2000, which rose $6.

Bean prices opened sharply higher than market expectations, in a short-lived reaction to a 13.5-percent increase in U.S. fourth-quarter cocoa grind figures. Traders had previously called for an increase of five percent or under.

"That had no bearing really. Usually that's the case in cocoa, they really don't have that much of an effect for us," one floor trader said.

Cocoa prices came under pressure from arbitrage selling throughout the morning, in light transactions, until speculative buying popped them back into positive territory.

Prendergast said that the market was beginning to improve after the onslaught of the Asian crisis.

"Consumption is gradually reviving and this will ultimately benefit cocoa prices, but not in the near term."

London's LIFFE cocoa ended mostly higher Friday as switch-led trading continued to dominate business. Active March closed four higher at 569 pounds a tonne.

U.S. cocoa grindings in the fourth quarter of 1999 rose 13.5 percent to 110,772 tonnes compared to the year-ago level, according to the Chocolate Manufacturers' Association.

The quantity of liquor melted fell 36.75 percent to 2,451 tonnes from the same quarter in 1998, while total butter melted likewise declined, by 32.93 percent to 10,943 tonnes.

Ivory Coast's military ruler General Robert Guei delivered a key message during a recent visit to three neighbouring nations that army rule may not be as brief as the international community expects.

A United Nations envoy has been holding talks with junta officials, politicians and civil society leaders since Wednesday to help accelerate the transition process.

In other news, cocoa exporters criticised a plan, submitted by two French economists, for a privately-run cocoa forward sales and price stabilisation system in Ivory Coast.

"Historically, plots of that sort tend to be theoretically sound and practically weak. I doubt if it will be enough to have a sizable impact on cocoa market prices," Prendergast said.

Ivorian exporters' association has until Jan. 27 to submit its opinion on the plan and to come up with alternative ideas.

Technically, chartists pegged nearby resistance for March CSCE cocoa at $864, while nearby support was seen at $824-20, then all the way down to $804-800.

Volume traded on Friday reached an estimated 8,358 lots against Thursday's official volume of 8,924 lots.

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