COMMODITIES : Price Scheme Halts Cocoa Futures Skid

Prices for future delivery of cocoa rose Tuesday as a new price support scheme emerged from an international meeting in London, but analysts said the plan was unlikely to halt the slide in prices.

On other markets, cattle futures advanced sharply while the pork complex was mixed; grains and soybeans were mixed; precious metals retreated; energy futures were mostly higher, and stock index futures advanced.

The International Cocoa Organization’s failure to reach agreement on a new price support plan after five days of meetings triggered the automatic implementation of a scheme allowing the ICCO to withhold up to 120,000 metric tons from the market.

But the organization lacks sufficient funding to finance the plan and its members, representing consumer and producer nations, were sharply divided on what intervention price should trigger the withholding mechanism, analysts said.

“It’s very questionable whether the withholding program will have any impact on the market,” said Kim Badenhop, an analyst with Merrill Lynch Capital Markets.

The spot price for cocoa has fallen more than $400 a metric ton since July due primarily to abundant supplies and rising production.

The ICCO intervened with a buffer-stock buying program that began in January, but the organization exhausted the program’s 250,000 metric ton allocation within two months.

The first news of the new price support plan sparked a rally on New York’s Coffee Sugar & Cocoa Exchange, where the contract for March delivery settled $17 higher at $1,600 a metric ton.

Cattle Futures Surge

But Badenhop said trading enthusiasm flagged on later reports explaining the problems with the plan.

Cattle futures posted impressive gains for the second consecutive session on the Chicago Mercantile Exchange in reaction to higher cash prices for cattle, carcasses and boxed beef, analysts said.

The cattle market had been depressed due to a Lenten season drop in consumer demand for meat. But a wave of packing plant closings last week has reduced beef supplies to the point where wholesale prices have begun to rise, said William J. Arndt, an analyst in Chicago for Dean Witter Reynolds.

Some concern remains that the drop in slaughters will lead to a backlog of slaughter-ready animals but “right now we’re trading the cash and the cash is strong,” Arndt said.

Hog futures followed cattle higher while frozen pork belly futures retreated on an exchange report showing an unexpectedly steep increase in supplies, he said.

Live cattle settled 0.20 cent to 1.37 cents higher, with April at 72.92 cents a pound; feeder cattle were 0.55 cent to 0.85 cent higher, with March at 81 cents a pound; hogs were 0.08 cent to 0.42 cent higher, with April at 43.72 cents a pound, and frozen pork bellies were 0.75 cent lower to 0.25 cent higher, with March at 53.95 cents a pound.

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