LONDON: Cocoa prices rose on Friday as former soldiers seized control of the second largest city in top grower Ivory Coast, prompting a wave of short covering.
Dealers said the unrest appeared to be spreading with reports that gunfire had erupted in the western cocoa growing region of Daloa, hours after demobilised soldiers seized the second largest city, Bouake.
"The first story was in a town (Bouake) which isn't in the cocoa areas but then there was a report it had spread to Daloa," one London dealer said. 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 18 pounds or 1.0 percent at 1,841 pounds a tonne at 1128 GMT while March New York cocoa rose $8 or 0.35 percent to $2,270 a tonne.
Cocoa prices fell sharply in 2016 with a favourable crop outlook in Ivory Coast contributing 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 0.36 cents or 1.7 percent at 20.42 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 $6.50 or 1.2 percent at $540 per tonne. Coffee prices were little changed with March robusta off $3 or 0.1 percent at $2,151 a tonne while March arabica rose 0.15 cent or 0.1 percent to $1.4390 per lb.
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