Short Supply Reported as Deadline Nears : Cotton Futures Advance to Daily Limit

Reports of a tight supply of certificated cotton for filling October contracts helped cotton futures advance Wednesday to the daily limit on the New York Cotton Exchange.

On other markets, cattle futures were sharply lower; grain and soybeans rebounded; energy futures were mixed, and precious metals were lower.

With just eight days to go before Oct. 24, the first notice day for October cotton delivery, word of tight supplies forced traders holding selling agreements to take cover by buying October cotton, said Ernest Simon, a cotton specialist with Prudential-Bache Securities in New York.

The buying binge sent the October contract up the 2 cent a pound limit, Simon said. The price then fell due to profit taking, then reversed and reached the limit a second time, staying at that level.

Other contracts followed suit, with all contracts for the 1987-88 crop settling limit up in heavy trading.

The cotton contract for September delivery settled at 75.89 cents a pound.

Cattle futures on the Chicago Mercantile Exchange plunged as expected in reaction to the Agriculture Department’s latest cattle-on-feed report showing a record number of cattle being fed for the slaughter market.

Feeder cattle settled down the 1.5 cent a pound limit on several deferred contracts. Live cattle for December traded down the limit before settling 1.47 cents lower at 66.90 cents a pound.

A New Record

The report, issued after Tuesday’s close, showed that the number of cattle being fed in the seven major beef states totaled 6.82 million head, up 6% from a year ago and 11% more than inventories two years ago.

“That’s not only a brand new record, but it was 20% above the average of the last 10 years,” noted Chuck Levitt, an analyst in Chicago with Shearson Lehman Bros. “That’s a big increase no matter how you cut it.”

The cattle that went on feedlots in August will be headed for slaughter in December, so traders rushed to sell December contracts, driving the price for December delivery down to 66.87 cents a pound before it closed slightly higher.

Analyst Charlie Richardson of Lind-Waldock in Denver said reports of lower cash prices for boxed and carcass beef helped push the market even lower than most analysts had expected.

Hogs were lower in response to lower prices on the cash markets, the analysts said. Frozen pork bellies were mixed.

Live cattle settled 1 cent to 1.47 cents lower, with October at 67.35 cents a pound; feeder cattle were 1 cent to 1.50 cents lower, with September at 77.77 cents a pound; live hogs were 0.12 to 0.57 cent lower, with October at 47.92 cents a pound; frozen pork bellies were 0.15 cent lower to 0.02 cent higher, with February at 59.32 cents a pound.

Grain and soybean futures rebounded amid signs of a slowed harvest and greater global demand, and closed sharply higher on the Chicago Board of Trade.

The soy complex led the surge, with meal for September delivery peaking at $180.70 a ton before settling at $179.90, up $2.90 a ton.