Cocoa prices jumped to their highest since 1977 after data showed demand for the chocolate ingredient by European confectioners rising at its fastest pace in a decade.

The region's so-called cocoa "grind" - the volumes processed by companies such as Barry Callebaut, Cadbury and Ferrero - topped 328,700 tonnes in the April-to-June quarter, an increase of 12.7% on the same period the year before.

While the grind remained below 2008 highs, the rate of increase was the highest since the July-to-September period of 2000, and was viewed as marginally ahead of market expectations of a 9-12% growth.

"It is neutral to bullish," Jake Wetherall at Rabobank said.

'Not volatile'

Cocoa for July rose nearly 4% to £2,709 a tonne in lunchtime deals in London, the highest price for a spot contract since September 1977.

However, many analysts were unmoved by the rally, pointing out that the better-traded September contract had shown a smaller reaction, rising by 2.8% to £2,465 a tonne.

"That's a new high, compared with late June, but only by a couple of pounds," Stephanie Garner at Sucden Financial said.

"It's really territory we have trod already."

It was being supported by some short-covering by investors, who "thought that prices were too strong, having to take cover".

Mr Wetherall said: "The market has not been volatile, apart from the front month."

'Manipulation' claims

Indeed, the workings of the July contract, which expires on Thursday, have been the subject of considerable discussion, after 16 cocoa groups, including the German Cocoa Trade Association, signed a letter to London's Liffe futures exchange alleging "manipulation" of the market.

The protestors have pointed to unusually large levels of July contracts still unclosed so close to their maturity. Some 25,000 contracts still remain open, potentially sufficient to support delivery of 250,000 tonnes of cocoa.

One trader told Agrimoney.com of rumours of a squeeze by a merchant which has taken out a large position in the contract, forcing those who have taken out hedging shorts to cover at a loss.

NYSE Liffe said last week it was planning a report on trading positions, similar to those issued by America's Commodity Futures Trading Commission on its markets.

July cocoa closed up 3.6% at £2,695 a tonne, with the September lot ending up 1.5% at £2,436 a tonne.