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CSCE cocoa continues to rise on speculative buying

NEW YORK: CSCE cocoa futures strengthened further on Tuesday as speculative buying triggered stops, taking prices back up to five-week highs and attracting more fund participation, traders said.

"It's moving higher gently," one New York-based trader said. "But after the type of decline it's been through, you won't find many people concerned about this intial rally."

Front months gained $17, with active May settling at $859 a tonne after trading $861 to $836. July closed at $881 and spot March at $819. The rest rose $17-$18.

Bean prices came in weaker on the opening bell, but quickly strengthened on the back of speculative and arbitrage buying, floor traders said.

"It started off fairly quiet, but once you were able to hold that pivot area around $836, you saw some fund type buying and it slowly worked its way up higher," one broker said.

He added that as prices breached the previous session's highs, "fund short covering and fresh longs came into the market".

Trade and manufacturer profit taking were seen at the higher end of the day's trading limits, with some arbitrage selling "when we were racing ahead of London".

But traders said that hedge selling from South American origins would more than likely reappear on Wednesday as Carnival celebrations draw to a close. "It looks good, but tomorrow I think you might see some of the origins who were off down in South America, back in," one floor dealer said.

In industry news, discussions on the future of a new international cocoa pact and world prices will be the focus of March 8-17 meetings at the International Cocoa Organisation, the ICCO said Tuesday.

London's LIFFE cocoa finished near the highs on Tuesday thanks to a late short covering rally, although origin selling continued to cap the upmove.

Active May LCCK0 last traded 12 pounds higher at 644 pounds a tonne having moved between 646-631 pounds a tonne.

LIFFE is to end open outcry trading for cocoa and coffee by fourth quarter 2000 and move to an electronic-based trading system, traders said Tuesday.

A spokesperson for LIFFE said the Exchange would be making an announcement on Wednesday.

Volume was estimated at 11,411 lots, compared to Monday's official tally of 6,098 lots.

Brokers said that around 1,500 Against Actuals (AAs) and "at least" 1,000 switches helped to boost transactions on Tuesday.

Traders pegged support in CSCE May at $835, then $815-10, while nearby resistance was seen at $867 with "very good resistance" coming in at $882-95.

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