Cocoa hits five-year high

London cocoa futures hit a five-year high on Tuesday, helped by a strong New York market and favourable currency fundamentals that made prices more attractive to overseas buyers, dealers said. Coffee ended down on profit-taking from recent 10-1/2 year highs, while sugar futures fell sharply under pressure from the upcoming March contract expiry.
London May cocoa hit a five-year high at 1,298 pounds per tonne as the pound fell, before trimming gains to end at 1,283 pounds per tonne, up 12 pounds from Monday's close on volume of 7,611 lots.
"The market has traded in line with New York, and has benefited from the weaker sterling," a dealer said. New York cocoa prices surged to 24-year highs at $2,499 per tonne as fund buying triggered buy orders.
Sterling weakened versus the dollar earlier on Tuesday after data showed UK consumer price inflation was not as high as expected, but cocoa's gains were eroded as the pound rallied later in the day.
Cocoa along with other soft commodities has seen waves of support from speculative and fund interest, as soft commodities have been tipped as a popular bet for 2008. In origin news, dealers said reports of good rainfall in top grower Ivory Coast had not had any market impact as the rains were considered normal for this time of year. Rains resumed in the main cocoa-growing regions, raising hopes of a good April to September mid-crop after more than a month of dry conditions.
COFFEE RETREATS: London coffee futures fell as investors booked profits from Monday's run to a 10-1/2 year high and dealer rolled out of front month March, but dealers said speculators were ready to buy at the lower levels. May closed down $11 to $2,227 per tonne on volume of 11,196 lots. Prices hit a 10-1/2 year high on Monday at $2,291.
Dealers said the lion's share of Tuesday's activity on the way down involved rolling of 9,000 lots from March into the May contract, but funds still held the cards on major market direction. "The funds are over-extended to the long side, however week on week we see further interest from new funds coming into commodities and they are not going to jump in from the short side," one dealer said.
On the trade front Russia has agreed gradually to lower import tariffs on coffee after joining the World Trade Organisation, a senior government official involved in trade negotiations said on Tuesday.
London sugar prices continued their volatile ride lower, moving further away from last month's 13-month high as traders eyed expiry of the spot March contract on Thursday. March ended $8.30 or 2.4 percent down at $332.00 per tonne.