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CSCE cocoa slumps on arbitrage, spec selling

NEW YORK: CSCE cocoa futures fell back on Monday when an early attempt by speculators to push the market higher failed and arbitrage selling uncovered commission-house stops, traders and brokers said.

Active March CCH0 settled down $17 at $844 a tonne after trading $866-$842. May CCK0 shed $14 to end at $875 and the rest lost $13-18.

"Commission house type buying took out some small, light stops around the $865 area, but they didn't get the second-leg to push the market through," one New York broker said.

But continued arbitrage and trade selling overshadowed the market, as prices traded in the lower half of their range throughout the majority of the trading session, one floor trader said.

"Late in the day you had spec (speculative) long liquidation as New York failed...on the upside and on the way down, you took out Friday's low and uncovered commission house type stops," the trader said.

Brokers and floor traders said that Monday's trading volume consisted mainly in spreads and AA's (Against Actuals).

Analysts said futures seem to be attempting to form a bottom, although a dip under key support level at $800 could not be entirely ruled out.

"We believe that cocoa futures prices are in a bottoming phase, but would abandon that view if March futures fell below $800 a tonne," softs analyst Arthur Stevenson said in a Futures Outlook made available Monday.

Both Stevenson and Salomon Smith Barney's Walter Spilka said brisk West African export flow and large 1999/2000 crops in the region which accounts for around 60 percent of world production continue to pressure prices.

London's LIFFE cocoa ended mostly lower Monday as switch-dominated business and origin selling allowed prices to weaken. Active March LCCHO closed two pounds lower at 567 pounds a tonne.

Technically, chartists peg nearby resistance for CSCE March at $865, with nearby support at $824-20, then all the way down to $804-800.

Volume was an estimated 8,650 lots against Friday's official tally of 7,748 lots.-Reuters