Cocoa futures sagged on Tuesday, depressed by speculative profit-taking and fund selling after the benchmark contract marked its highest trade in nearly three weeks, traders said.
"There was some fund selling that came late into the market. The market had a little short selling and, once we broke through the unchanged area, the market took on a weak technical picture," said a cocoa trader.
Trade selling amid signs of ample cocoa supply also weighed on prices, the trader said.
The New York Board of Trade's active contract for May delivery settled off $13 at $1,488 a tonne, just $4 above the bottom trade of $1,484. Earlier in the session, the contract topped at $1,519 - the highest price since March 17.
But a lack of follow-through fund buying unsettled speculators with weak long positions, traders said. Among other contracts, July fell $11 to end at $1,516 and the rest slid $11 to $12.
Cocoa stocks in exchange-licensed warehouses in the United States have been steadily rising. As of April 3, NYBOT-licensed cocoa stocks reached 4,053,139 bags (standard bag equivalent), well above the 2,561,343 bags a year ago.
"You saw stocks from Ivory Coast grow here early on in the season," said a cocoa trader at a commodities brokerage. "As you can see, there is a fair amount of supply here," he said.
Ivory Coast, which produces some 40 percent of the world's cocoa, had an early start to its October-March main crop, which finished at an estimated 914,000 tonnes. But that compared with the 944,000 tonnes in the 2004/05 season.
Ivory Coast's April-September intermediate crop is expected to produce anywhere from 250,000 to 350,000 tonnes.
In London, the Liffe's May cocoa contract concluded down 19 pounds, or 2.05 percent, at 906 pounds a tonne.
The commodity sector saw broad-based selling on Tuesday. By 11:50 am EDT (1550 GMT), when the NYBOT cocoa market closed, the Reuters/Jefferies CRB Index of 19 commodity futures was down 3.45 points, or 1.03 percent, at 332.16.
Meanwhile, cocoa traders cited a continuation of contract switching as speculators rolled out of the front-month contract ahead of its first notice day for delivery on April 17.
Cocoa futures trading volume on the NYBOT reached an estimated 13,202 contracts, compared with the 13,288 lots officially tallied the previous session. Open interest in cocoa futures rose by 960 lots on April 3, taking the total to 129,281 contracts, exchange data showed.
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