Cocoa futures extended their recovery, settling at a four-month high, after data showed European processing volumes at their strongest in six years, spurring hopes of further upgrades to world demand estimates.
Cocoa futures for December closed up 2.5% at $2,097 a tonne, their highest close since June, and taking to 4.4% their recovery in two sessions.
Traders attributed the strength in part to technical factors, after the contract in the last session closed back above its 200-day moving average, and on Monday rebuffed an attempt to take prices back below the psychologically important $2,000-a-tonne mark.
"After yesterday's activity, momentum is still on the upside," Sucden Financial said.
However, gains were also attributed to data from the European Cocoa Association showing that European cocoa processing volumes in the July-to-September quarter hit 353,544 tonnes.
Besides representing a rise of 3.0% year on year, that figure was a record high for the period, on data going back to 1999.
It was the highest for any quarter since the January-to-March period of 2011.
The figure was also ahead of the 351,000-tonne outcome suggested by a Bloomberg poll of analysts, although in line with the results of a Reuters survey.
Commerzbank said that the data - coupled with a figure from Malaysia overnight showing 4.7% growth in grinding volumes in the July-to-September period – could prompt the International Cocoa Organization to downgrade further its expectations for the world cocoa output surplus in 2016-17, which finished last month.
"The current data could result in a renewed upward adjustment of the demand estimate," the bank said.
However, it cautioned that estimates for the cocoa world supply surplus at the close of last season looked likely to remain high, urging some caution too over the prospect of North American processing data ahead.
"Grinding there has been on the decline of late, unlike in Europe," the bank said.
By Mike Verdin