WSJ -- Cocoa Drops 10% on Selling By Speculators, Producers.
[As I often say : Great news for chocolate lovers !
Also -- I particularly liked that reference to "stale longs" (which I put in bold print below).
These must be cocoa futures traders who left their Hershey bars too long in their desk drawers.]
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February 20, 2003
Cocoa Drops 10% on Selling By Speculators, Producers
By CLAIRE GRIERSON
OsterDowJones Commodity News
NEW YORK -- Cocoa prices on the Coffee, Sugar and Cocoa Exchange recorded one of their largest single-day falls Thursday, slumping 10% as technical factors stirred up a wave of speculative selling.
The most-active May contract dropped $217 to finish at $2,072 a metric ton, after having plummeted $244 at one stage during the session. That eclipsed the $201 drop in October 2002, which the New York Board of Trade -- owner of the CSCE -- had said was the biggest single-day decline in its surviving records, which date from about 1989. The front-month March contract fell $196 to $2,120 a ton.
Though cocoa futures have been traded since 1925, Guy Taylor, a spokesman for Nybot, said some historical price data on cocoa that was recorded on paper were lost when Nybot's former offices at the World Trade Center were destroyed in 2001. Its fully electronic databases weren't created until the late 1980s.
[commods]
Thursday, sentiment was damaged before the New York market opened by price declines on the London International Financial Futures and Options Exchange. Early losses there had caught many by surprise and were caused by the departures of what traders described as "stale longs." Long positions are purchases of futures made in anticipation of higher prices, but some long-position holders of cocoa got tired of waiting for fresh gains.
An opening call of $75 lower set New York futures to breach what traders identified as an important support level at $2,242. The technical picture was already painted for a heavy loss, with other important levels collapsing.
The first $100 drop was scored on the opening as speculative funds and cocoa producers sold. As the selling became more aggressive, so did the price collapse, with speculative sell stops -- preplaced orders to sell -- activated.
Scott Stern, president of MP Commodities, a floor brokerage firm and member of the New York Board of Trade, said it was massive speculative selling that dragged the market down. Another reason for the swift fall was the absence of substantial buying interest from commercial enterprises, such as chocolate makers and other cocoa users, who were instead content to buy smaller amounts on a scale-down basis, or at set price intervals.
Boyd Cruel, soft-commodities analyst with brokerage firm Alaron Trading Corp. in Chicago, said the lack of violence in Ivory Coast, the world's top cocoa-producing country, was also aiding the downward route of the market.
Ivory Coast has been ravaged by violent outbursts since an attempted coup d'etat in September. Fear of a disruption in cocoa supplies has driven cocoa prices higher. Despite the unrest, the arrival of cocoa at Ivorian ports has been on target.
In other commodity markets:
CRUDE OIL: New York Mercantile Exchange futures fell in a technical correction, as bulls and bears struggled to interpret the latest raft of weekly inventory data, as well as predict the timing of a potential war on Iraq, traders said. The March crude contract, which expired Thursday, fell 37 cents to $36.79 a barrel.
HEATING OIL: Nymex futures dropped, with traders saying earlier highs were "way overdone," despite news of a decline in distillate stocks in weekly inventory data. The March contract dropped 4.06 cents to $1.0587 a gallon.
-- Leah Goodman of Dow Jones Newswires contributed to this article.
Write to Claire Grierson at cgrierson@osterdowjones.com
Updated February 20, 2003 11:49 p.m. EST
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