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CSCE cocoa moves up on short cover, Ivory Coast eyed

NEW YORK: Short covering turned CSCE cocoa futures higher on Friday after two losing sessions, helped by industry buying and uncertainty about the political situation in top-grower Ivory Coast, dealers said.

Active May gained $6 to settle at $800 a tonne, having traded $794-$811 during the session. It fell $2 on Thursday and $19 on Wednesday. Second-month July rose $7 to $831, trading in a $825-840 range.

The rest of the board rose $5-$7. Dealers said estimated final volume of 6,520 was down from official turnover Thursday of 8,354 and included a "fair amount" of spreads.

"We caught a little bit of trade-type and industry buying down toward the lows today. That could be in reference to the Ivory Coast uneasiness," said a floor broker.

Locals were gunning for speculator sell-stops, pushing prices lower in early trade. But the sales were well absorbed on the way down, the broker said.

New York cocoa fell to a 27-year low at $759 a tonne on Feb 25, on fears of a glut and a predicted record crop from Ivory Coast and neighbouring Ghana. But cocoa is now digesting the drop.

"There has been talk that producers are going to withold selling their cocoa, which they did earlier in the season," said Walter Spilka, softs analyst at Salomon Smith Barney. "It probably isn't going to make too much of a difference now, mostly because the main crop is done."

Ivorian farm leaders said a threat by their group to go on strike from Saturday unless the government ordered a return to cocoa price stabilisation has been suspended pending a review on Monday.

The farmers have blamed liberalisation of the sector for their difficulties and have previously threatened to bloc marketing of all farm products from April 1 if the government does not reintroduce a forward sales system for cocoa.

The market is now waiting for the Ivorian mid crop in April. The mid crop is expected to be large, but not a record, owing to favourable weather conditions.

Spilka expected the April crop to come in around 230,000-240,000 tonnes.

"But the problem with the crop is it's lower quality, the beans are smaller," he said. "By and large, that crop doesn't get sold too far and the government has already said it isn't going to allow the export of low quality cocoa."

LIFFE cocoa finished firmer and near the day's highs on Friday, on profit-taking after recent falls. Active July LCCN0 last traded at 594 pounds a tonne, up 13 from Thursday.

The nine-day RSI for May cocoa rose out of oversold territory to 33 on Friday, from 27 on Thursday. Technical analysts usually interpret an RSI reading of 30 or lower as oversold and 70 or above as overbought. -Reuters