US cocoa futures eked out modest gains to settle at a new 3-month high on Tuesday, but speculators were nervous the past week's bullish trend may be ready for a correction, traders said.
The New York Board of Trade's (NYBOT) active March cocoa contract rose just $1 to end at $1,480 a tonne, after trading from $1,475 to $1,497.
The top trade was the loftiest for the contract since September 13. Among other cocoa futures, May likewise gained $1 to finish at $1,500, and longer-dated months climbed $4 to $5. "There was some decent speculative and light fund buying this but it just dried up and there were sellers on the close," said a trader.
"It's got a good chance for a little correction. The one factor is origin selling which hasn't been around, and if it does comes around then that will prevent us from this uptrend that we've been in," he added.
Arbitrage-related activity amid recent dollar weakness had been the initial spark in this week's rally in cocoa futures, coupled with a slowdown in the pace of bean arrivals at ports in No 1 cocoa producer Ivory Coast.
The greenback firmed against major currencies on Tuesday ahead of an expected US interest rate rise. The US Federal Reserve is widely expected to bump up its key rate for a 13th straight time to 4.25 percent after its meeting later today.
On Monday, exporters in Ivory Coast said bean arrivals to ports from the bush last week had slowed to 35,000 to 40,000 tonnes, compared with an average of about 50,000 tonnes in previous weeks.
From October 1 to December 11, exporters estimated arrivals reached 505,000 tonnes, well above the some 305,000 tonnes delivered to ports during the same period last year.
Market participants question whether Ivory Coast's 2005/06 (October-March) main crop will yield 1 million tonnes, a figure they say is needed to meet steady to growing world demand. NYBOT cocoa futures trading volume reached an estimated 10,488 lots, up from the 9,550 lots officially tallied the previous session.