New York cocoa futures prices recouped losses to end at a four-month high on Monday, extending gains for the third consecutive session amid increasing fund demand and prospects of a global supply deficit. At the New York Board of Trade, cocoa futures extended gains for the third consecutive session despite setback on concerns about non-commercial interest in futures reaching levels above market expectations.
"There is a reassessment going on in the market as to how much of these funds index-funds are in for the long haul or how much of this is hot money that could be reveresed and turned around," said a trader.
The NYBOT's active May cocoa delivery gained $16 to settle at $1,776 a tonne, it's highest since November 9, when it ended at $1,793. The contract was dealt in a daily trading from $1,725 to $1,782. The past few weeks of speculative-type buying pushed the benchmark price to a 16-week peak at $1,762 on Friday.
As of March 1, the speculative net long position in cocoa futures, excluding nonreportable contracts, jumped to 35,643 lots from 17,741 lots on February 22, showed the latest Commitments of Traders report issued by the Commodity Futures Trading Commission last week.
"Probably the most extraordinary issue in this market at present is the behaviour of commodity funds," Sholom Sanik, an analyst at Friedberg Mercantile Group, said in a recent research report. "While the funds are supporting the market and old resistance levels fall by the wayside, bulls can remain long this market.
Bearish open interest signals, however, should be monitored carefully for any sign that the funds are getting ready to liquidate," the Canada-based analyst said.
The bullish sentiment has been fuelled in part by industry anticipating world cocoa demand to outpace output this year.
"The underlying fundamental picture isn't bad. It's neutral to mildly friendly rather than this is some kind of disaster unravelling in cocoa," said a trader.
Last on Wednesday, the International Cocoa Organisation projected the global cocoa market will see a 50,000-tonne deficit in the 2004/05 season, compared with a 233,000-tonne surplus the previous year.
A 7.4-percent drop in world 2004/05 output to 3.215 million tonnes has largely been attributed to poor weather conditions during key crop development stages in leading growing region West Africa last year.
Among other cocoa contracts, July rose $17 to finish at $1,789 and deferred deliveries ended up $17 to $21.
Estimated cocoa futures trading volume at NYBOT reached 10,448 lots, down from the official 13,331 contracts the previous session.
Open interest rose 3,862 lots to 139,621 lots as of March 4. In London, the Liffe's key May cocoa contract in London ended at 942 a pound, up 11 pounds. On the technical charts, traders pegged support in NYBOT may cocoa at $1,725 and then $1,705, with resistance at $1,793 and then $1,808.
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