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CSCE cocoa falls back in switch dominated day

NEW YORK: CSCE cocoa futures settled marginally lower on Friday in unenthusiastic business activities, with the bulk of transactions comprising July switches, traders said.

Spot May cocoa dropped back $8 to close at $807 a tonne, trading from $824-$799. Active July and September dipped $5, with the second-month settling at $846, moving in a $859-839 range.

The rest of the board rose by $7-$12.

Open interest in spot May sank by 7,653 contracts as of April 13 to 2,785, whilst it swelled to 39,827 contracts in second-month July, a rise of 4,848.

The front month entered its month-long notice period on Friday.

"Early on you had some spec (speculator) buying in July and scale down buying in Sep, it might have been manufacturer buying," a floor dealer said.

New York cocoa futures opened flat in line with market expectations and initially headed higher, but as the market began to dip, prices could no longer hold and sell stops were triggered, the trader added.

"Specs were selling in the afternoon in May and there was some trade selling," he said.

Dealers added that switches continued to dominate proceedings, estimating that around 3,500 July switches were traded, with little outright business.

"It's just rangebound for now, at the lower end of the range. It should directionally go a little higher, the selling should be out of the way," one physical trader said.

"We cleaned up May nicely, so we'll see."

LIFFE cocoa ended down after a late fall with New York in a thin rangebound session. Benchmark July settled five pounds lower at 597 pounds a tonne.

US traders continued to throw scepticism on the latest scheme from top cocoa producer Ivory Coast to shore up ailing international prices.

The government is looking at the possibility of cutting down cocoa trees and reducing the crop by 25 percent to 900,000 tonnes.

The authors of the scheme reckon it could boost world cocoa prices by 20-30 percent.

"Oh come on, everyone's sceptical about that. So we'll see. All this is a bit far-fetched," one trader said.

"I don't see them chopping any trees down. Although they do have a large section of very old trees, which are reaching maturity," another trader said.

"So if they cut them down it's not really anything. They are still producing so of course it would cut back some production, but it's not that bold a statement."

On a technical basis, traders said July cocoa should enjoy support at $828-25, then $822, followed by $816-12. Resistance was pegged at $860 and followed by $867.

CSCE estimated final volume was 15,512 lots, against the previous official tally of 25,209 contracts.

Call volume hit an estimated 673 lots while put volume touched an estimated 159 lots.

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