CSCE cocoa futures finished higher Tuesday as short-covering by funds and short-term speculators encountered little selling from producers, according to brokers.
"There was steady buying today from the funds who are holding a large short position in relation to the level of open interest. The funds probably bought 1,500 lots on the day," said one commission house broker.
Funds held a 15,687 lot gross short position as of March 9, according the Commitment of Traders report released by the CFTC Friday. Open interest was 98,202 lots on the same date.
The active May cocoa contract closed up $31 at $1,474 a tonne, with a $1,434-$1,484 trading range.
Prices have been edging higher since Wednesday, when they touched $1,380 a tonne, their lowest level since November 4.
"Cocoa prices were very oversold last week. The trade took advantage of the decline and the fund selling to step up their forward coverage and buying," the broker added.
Traders said that producer selling was lacking which made it easier for the fund buying to move prices higher Tuesday.
"This is the end of the main crop so you normally don't see as much hedging pressure," said one broker. Despite the price improvement, traders viewed today's advance as an opportunity to short the market.
"May might get pushed up to $1,500 but there are no supply problems and bean prices should head lower," one trader said.
Ivory Coast cocoa bean exports totalled 676,415 tonnes from October to February of the 2003/04 season, down almost 23 percent from the same period a year earlier, port data showed on Tuesday. Some 149,169 tonnes of beans were exported in February, down about 15 percent from the same month last year.
Analysts still see a bearish fundamental picture that has driven prices lower this year, with improved supply prospects from the top two producers - Ivory Coast and Ghana.
Volume Tuesday came to 5,674 lots versus 4,227 Monday.
July cocoa gained $306 to close at $1,481 and the back months finished $28 to $30 higher.
Spot March cocoa settled at $1,444 a tonne on its last trade day.
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