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CSCE cocoa falls to five week lows, specs sell

NEW YORK: CSCE cocoa futures continued to head south on Friday, falling to their lowest point in over a month, as speculators assaulted the market again with selling, traders and brokers said.

"Continuation of the spec (speculative) liquidation seems to be the feature," one trader said.

Active March settled down $12 at $811 a tonne after trading $836-$805, its lowest intraday level since hitting $800 on Dec 23, 1999. Second-month May shed $13 to $842 and back months fell $10-$15.

New York bean prices saw choppy morning trade as speculators put the market under pressure early on, with currency related selling adding to the fall, traders and analysts said.

"Specs (speculators) just keep dumping out and when they're done, they just knock it around when someone comes in and tries to buy," one floor trader said.

"I think the market is being undermined in terms of currency related arbitrage selling today. You've seen what's happened to the pound and obviously that's not helping dollar-denominated cocoa," Arthur Stevenson, softs analyst with Prudential Securities said.

Further speculative selling triggered sell stops late in the day, sending active March spiraling down towards a key support level at $800.

"The closer we get to the $800 level, the more perilous the thing becomes for short term bulls. I would imagine that we should expect to see a build up of sell stops just below the $800 level at about $796," Stevenson said.

He added that continuing strong Ivory Coast arrivals of cocoa beans to ports "may have unsettled some people".

But traders said that despite the fund liquidation, a fair amount of industry buying was found at the lowest levels.

London's LIFFE cocoa ended slightly higher on Friday after heavy switch business and reacting to a weaker sterling/dollar rate. Key March ended two pounds up at 564 pounds a tonne.

Technically, chartists pegged nearby resistance for March CSCE cocoa at $855-58, then $872-75, while nearby support was seen at $800, then $796.

Volume was an estimated 13,823 lots against Thursday's official volume of 12,344 lots.-Reuters