US cocoa futures closed Friday with substantial gains, though off the 11-week peak achieved early in the session when general commodity market buying swept bean futures up through a range high that had stuck since mid-March, traders said. Steep dollar declines and record gains in crude oil prices acted as a catalyst for heavy fund buying in commodities across the board, including cocoa futures.
"It was a combination of dollar weakness and the technical breakout of a trading range. There was broad interest, but it was mostly speculative buying. And when it started breaking above the previous high in the $2,823 to $2,825 area, that brought some new buying into the market," said a cocoa dealer.
Benchmark ICE July cocoa advanced $86 to settle at $2,878 a tonne, after shooting to a high at $2,906 per tonne that dates back to March 17. The session low was $2,779. After several failed attempts this week the July contract managed to definitively rupture the April 28 peak at $2,824 a tonne. Some traders said automatic buy orders sitting above that level were triggered on the way up, acting as a strong signal for speculative funds to buy cocoa.
Across the board, there was heavy buying of cocoa contracts, which ended the session from $45 to $85 higher. Cocoa futures continue trading electronically until 3:15 pm EDT (1915 GMT) when July cocoa was $52 higher at $2,844. July contracts turned in a heavy volume at 7,072 lots. While the questionable crop in Ivory Coast remains a concern, it was not a driving force on Friday, traders said.
"There is a fundamental, underlying issue with the crop in Ivory Coast, but I think at current levels the market would be overvalued ifyou look at pure fundamentals," a trader said. From world's top grower Ivory Coast, exporters said weekly mid-crop harvest cocoa arrivals at ports were below expected levels, reflecting weak and variable production at the late stage of the season.
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