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CSCE cocoa slumps, but gets lift from spec buying

NEW YORK: CSCE cocoa futures settled lower on Friday, with spot March touching a new lifetime low, but some late speculative buying from a trading house gave the market a pop, traders and brokers said.

"The sell-off was all spec (speculator) related. Into the close I think it was a trade group who came in and started buying May and July. That rescued the market," one broker with a commodity trading house said.

Front-month March settled down $17 at $759 a tonne after trading $775-750, a new life-of-contract low. Benchmark May lost $11 to $794 after moving in a $804-786 range, having avoided a new lifetime low by just a few dollars. Back months lost $8-9.

Brokers said locals helped press prices down, triggering sell stops and attracting speculative sales.

"On the way down you saw some pretty good manufacturer-type buying and a little bit of trade shortcovering as well," one broker said.

March-May rollover activity continued to dominate proceedings, as funds move out of spot March ahead of notice day. "Basically I'd say that today, still about 75 percent of the business was switches," a floor dealer said.

Open interest in March, which enters its month-long notice period on Feb 15, decreased by 4,424 lots to 14,272 as of Feb 10, while it rose by 2,015 to 37,463 lots in active May.

Traders are looking for a reduction in the speculators' net long position, which stood at around 24,500 lots as of Jan 25.

The previous Commitments of Traders report was the trigger which saw prices slide down to their lowest level in over 25 years.

"I think it's going to be down quiet a bit. I'm definitely looking for south of 15,000 and some are even looking a little bit lower," one broker said.

London's LIFFE cocoa ended lower, its early drift reinforced by New York's weakness. Active May last traded three pounds down at 571 pounds a tonne.

The market also continued to come under pressure from upbeat West African cocoa bean arrivals, with at least another 70,000 tonnes coming into Ivory Coast ports in the week to February 6.

Ghana cocoa purchases to the end of the 15th week of the 1999/2000 season were a cumulative 368,968 tonnes, compared with 315,866 at the end of the corresponding week of the year-earlier season.

Technically, traders put nearby support for CSCE May at $775, with resistance at $826.

Volume traded on Friday reached an estimated 16,850 lots against the previous official volume of 12,175 lots.

The nine-day relative strength index (RSI) of May cocoa stood at 34 at the close, compared to 42 on Thursday.

Technicians normally believe an RSI reading of 30 or less is an indication that the market is oversold, while 70 or more is usually a sign it is overbought on a short-term basis.

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