US cocoa futures extended last week's losses on Monday, with speculative liquidation and short selling knocking the benchmark delivery down 2.2 percent to near its contract low, market sources said.
The New York Board of Trade's active December cocoa contract tumbled $31 to settle at $1,351 a tonne, after trading from $1,349 to $1,372. The bottom trade was the weakest for the contract since October 12 and just $21 above $1,328, the contract's floor that was marked on September 26.
Among other cocoa futures, March cocoa lost $30 to end at $1,392, and back month cocoa futures shed $27 to $28. It was the fourth consecutive session of price declines.
Traders and analysts attributed the bearish sentiment to signs of producer hedging and a good start to Ivory Coast's 2005/06 main crop harvest, despite lingering political tension in the world's biggest cocoa producing country.
"Everybody sees the crop flows and knows there are a few more months of this to come," said an US-based cocoa broker. The ports in Ivory Coast have been awash with cocoa beans flowing from the bush, fuelling market sentiment of ample global supply.
But exporters in the West African country remain concerned about persistent political volatility, largely spawned by a 2002 civil war that split the country.
Ivory Coast President Laurent Gbagbo clung to power on Monday a day after his five-year term had ended, but rebels who occupy half of the country refuse to recognise him and have named their own prime minister.
Still, threats by hard-line opponents to launch massive street protesters to topple Gbagbo by force after midnight on Sunday failed to materialise.
"All of the protests ended without any major incident, so a lot of the insurance buying that was taken out prior to the weekend some of that was dumped on to the market today," the broker said.
Meanwhile, a strengthening dollar likewise fuelled the bearish sentiment towards dollar-denominated commodities, inciting arbitrage-related selling here.
The dollar surged against sterling after a jump in US personal income and an increase in core inflation fanned market expectations of more US interest rate rises.
In London, the Life's benchmark December cocoa delivery settled at 808 pounds a tonne, down about 2.1 percent. Traders estimated NYBOT futures turnover reached 15,011 contracts.
That compared with Friday's official tally of 14,349 lots. "I think the (speculators) sold about 4,000 lots," said a trader, pointing out that non-commercial positions in cocoa futures were likely to be net short.