Cocoa prices rose on Monday at the Coffee, Sugar & Cocoa Exchange after the International Cocoa Organization forged an agreement over the weekend to support prices by reactivating a buffer stock to take excess supplies off the market.
March delivery cocoa settled $19 higher at $1,902 a ton in New York, reflecting gains in London cocoa futures.
But prices failed to break out of a relatively narrow range of trading as some dealers already discounted the long-anticipated agreement. Others were unconvinced that buying for the buffer stock would begin soon. After trading, the ICCO announced that it would tender today for 4,000 tons of cocoa beans for the buffer.
Although sources agreed that the decision to reactivate the buffer stock by buying from producers or dealers would lift prices in the short term, opinions differed about its effectiveness in combating existing oversupply in the long run.
On other markets, copper futures advanced sharply; precious metals moved higher; energy futures rose; grains and soybeans were mixed, and stock index futures advanced.
Prices for future delivery of frozen pork bellies shot up to the limit for daily trading, reflecting cold weather worries pervading the livestock and meat pits at the Chicago Mercantile Exchange.
Pork belly futures advanced the 2-cents-a-pound daily limit in the first hour of trading and remained locked limit up the rest of the session, said Philip Stanley, an analyst in Chicago with Thomson McKinnon Securities Inc.
Stanley said the surge was rooted in technical factors and in fears that a severe winter storm blowing in from the Southwest would dump large amounts of snow on hog-producing states, slowing the movement of hogs to market.
He said a temporary drop in supplies could drive up cash prices for hogs and lead to greater demand for frozen pork bellies, which are sliced to make bacon.
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