Speculators are holding large net short positions in both New York and London cocoa, lured by a prolonged decline in prices and the prospect of a global surplus in the current 2016/17 season. "You have got a lot of money in cocoa which doesn't trade it too often and seeing those sort of headlines, they are not going to mess about and we've seen short covering," the dealer added.
May London cocoa was up 15 pounds or 0.8 percent at 1,838 pounds a tonne at 1402 GMT after initially surging to a peak of 1,860 pounds following the reports from Ivory Coast. A strong dollar after the release of US jobs data capped gains in New York cocoa with March up just $4 or 0.2 percent to $2,266 a tonne.
Cocoa prices fell sharply in 2016 as a favourable crop outlook in Ivory Coast contributed to expectations there could be a global surplus of around 150,000 to 225,000 tonnes in the 2016/17 season. Raw sugar prices were lower with March down 0.23 cents or 1.1 percent at 20.55 cents a lb. Dealers said the market was weighed by a bout of profit-taking after a strong post-Christmas rally linked partly to a diminished crop outlook in top consumer India.
The possibility that production in China could rise this season also helped to stall the run-up. China's 2016/17 sugar production had reached more than 2.3 million tonnes by December, the state planner said on Friday, citing data from the China Sugar Association. The National Development and Reform Commission did not give comparable figures for last year but a major industry website earlier reported a significant increase in output from the country's top producing region of Guangxi. March white sugar was down $3.50 or 0.6 percent at $543 per tonne. Coffee prices were slightly lower, weighed partly by a stronger dollar, with Mrch robusta off $4 or 0.2 percent at $2,150 a tonne while March arabica fell 0.65 cent or 0.45 percent to $1.4310 per lb.