US cocoa futures closed 1.8 percent higher on Thursday after short-covering and potential for trouble in top producing country Ivory Coast lifted the market. December cocoa on the New York Board of Trade closed up $27 at $1,490 a tonne, just off the day's high of $1,492. The bottom was $1,457, below the one-week low of $1,459 hit on Wednesday.
March cocoa settled $28 up at $1,525. The rest of the York Board of Trade cocoa complex ended up $24-$27. But futures volume fell to an estimated 12,522 lots from Wednesday's official tally of 19,047, indicating some market participants were not ready for prices to revisit the critical $1,500 a tonne mark.
"Funds that had been running short decided to cover after they saw little support for prices to go below yesterday's low," said a cocoa trader in New York.
"The other reason for the spike was the UN decision on Ivory Coast." The UN Security Council voted unanimously on Wednesday to shift power in Ivory Coast from President Laurent Gbagbo to Prime Minister Charles Konan Banyu and guide the West African nation to elections within a year.
Elections were initially due by October 31, 2005. But, when time ran out without a vote, the council authorised a transitional government to stay in power through October 2006. A year later, voting has still not been held due to continual feuding between rival factions in the once prosperous cocoa-growing nation, split since a 2002-2003 civil war into a rebel-held north and government-held south.
The transitional government decided by the UN Security Council on Wednesday included Gbagbo, who has often acted in ways that undermined the peace process in the turbulent and divided nation. "This basically means status quo, nothing changes in Ivory Coast, and it could open the door for more tension with the rebels there," the New York trader said.
"As long as the threat to the cocoa industry from a political fallout in the Coast remains, prices will be supported." The London cocoa market was also boosted by gains in New York, but prices remained comfortably within a recent range. December cocoa in London closed 12 pounds higher at 832 pounds a tonne, near the top of the day's range of 835 to 817. Total volume was 8,593 lots.
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