New York cocoa futures closed modestly weaker amid thinly traded volumes on Tuesday, with market players focusing on spread trading between contracts following the previous session's sharp drop, traders said. "After yesterday's big move down, the market slowed down and we ended a touch lower on the day," said a trader.
"It was very light volume today," he said, pointing out market players were focused on trading the spreads between the two nearest delivery months.
The New York Board of Trade's front-month May cocoa contract slipped $2 to settle at $1,731 a tonne, extending the previous session's 6-percent fall. The May contract traded in a daily range from $1,723 to $1,748.
The July delivery declined $3 to $1,749 a tonne, while more distant contracts shed $2 to $3 on the day.
Floor traders at the New York Board of Trade'ssaid estimated trading volume in cocoa futures reached 4,655 contracts, down from Monday's official tally of 12,826 lots.
Dealers attributed Monday's drop in prices largely to managed-money funds taking profits amid strong dollar gains against sterling, which is the currency of cocoa futures in London.
The dollar traded little changed on Tuesday after the United States producer prices were reported broadly in line with market expectations and ahead of a United States Federal Reserve policy decision and statement expected later today.
The United States Federal Reserve is widely expected to raise interest rates by a quarter point to 2.75 percent in its seventh consecutive hike, while some analysts expect it could hint at a more aggressive stance towards further rate increases.
In London, Liffe's cocoa futures prices finished narrowly mixed.
Meanwhile, armed ethnic groups in the west of the country vowed on Tuesday to carry on fighting each other over land rich with cocoa and coffee.
Long-standing disputes over land rights were exacerbated by the outbreak of civil war in 2002.
Even though the government and rebels have stopped fighting for now, the lawless west remains subjected to violence.
Market sources said that any news about unrest in top cocoa growing country Ivory Coast generally adds support to futures prices, although the upside is limited since the bulk of the country's main crop has been harvested.
"We are in between crops right now, so there is nothing to slow down," said Boyd Cruel.
SENIOR SOFTS ANALYST AT ALARON TRADING: "The main crop is basically done and we are just waiting for the mid crop to be harvested in the next couple of weeks.
If this (violence) happens in the next couple of weeks, and we are seeing no movement of beans in about a month, then it will be a different story," he said.
The smaller mid production runs from April through September.
Cruel pegged key technical support in May cocoa at $1,700 with resistance between $1,750 to $1,755.
As of March 21, open interest in New York Board of Trade's cocoa futures fell 929 lots to 152,767 contracts.