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CSCE cocoa settles higher in spec-led correction

NEW YORK: Speculative buying in New York cocoa futures put a tentative halt to a sharp slide in prices Tuesday as the market attempted to correct, dealers said.

"I really thought we were poised to test the $841 level. I think it was really specs (speculators) and maybe a little manufacturer buying," one New York based cocoa trader said. "Overall it still looks negative."

Active May settled at $868 a tonne, $11 higher, having traded between $870 and $845. Second month July cocoa closed at $895, up $10, traded $897 to $872. Back months gained $11 to $12.

Although bean prices came in a little higher as predicted after Monday's shakeout, speculative selling and long liquidation soon came in to hammer prices back down to test the key $840-41 resistance level, brokers said.

But manufacturer and industry buying at the lows allowed the market to steady and then hold, while speculative type buying was seen coming in once key May broke through the unchanged level, they added.

"It was commission house-type buying and the locals started to do a little bit of short-covering once London was closed. $841-40 is a key area, so once you moved away from that, a little bit of spec type buying came into the market," one broker said.

One trader said some speculators may have been attracted into the market after Ivory Coast's announcement that growers would hold back sub-grade beans, but he was unconvinced by the top cocoa grower's statement.

"Are you kidding me?" he said when asked if producers would really adhere to the ban. "They're not going to throw one bean away. I think they'll export every bean they produce."

Ivory Coast Agriculture Minister Luc Koffi announced late on Monday a ban on exports of cocoa batches numbering more than 100 beans per 100 grammes.

LIFFE cocoa ended near the day's lows on Tuesday, with active July down 18 to 623 pounds a tonne. Spot May finished 17 pounds a tonne lower at 616 pounds.

In New York, pivotal support for the May contract is at $840-41 a tonne.

"The key area is going to be $840. If it can keep above $840, the specs will try to take it up again," one broker said.

"I think the market's just going to chop around trying to correct itself now after the decline we've seen over the last four days."

Volume was estimated at 12,621 lots versus Monday's official tally of 10,582 contracts.ÑReuters