COMMODITIES : Cocoa Futures Prices Fall to 12-Year Low

Cocoa futures prices plunged to their lowest level in 12 years Friday on reports that the International Cocoa Organization was considering drastic changes in the funding of its price-support operations.

Cocoa for September delivery on New York’s Coffee, Sugar & Cocoa Exchange fell $37 to settle at $1,266 per metric ton, the lowest price since late 1976.

On other markets, cattle futures advanced while pork futures were mixed; grains and soybeans were mostly lower; precious metals declined; energy futures rose, and stock index futures were unchanged.

The cocoa market, already weakened by large surpluses, was shaken by reports that the secretary of the International Cocoa Organization had circulated a memo suggesting that producer nations stop paying a levy to the organization on Oct. 1, the beginning of the 1988-89 marketing year.

The current ICO agreement requires producers to pay the organization a $30 levy for each metric ton of cocoa they sell. The organization of the world’s largest cocoa producer and consumer nations uses the money to control world prices by buying and maintaining a buffer stock of surplus cocoa.

Producers have fallen $68 million behind in their levy payments, with the largest producers--the Ivory Coast and Brazil--owing $48 million and $9 million, respectively, according to Sandra Kaul, cocoa market analyst with Shearson Lehman Hutton Inc. in New York.

The ICO secretary’s memo to the organization’s members suggested that the organization should abandon any hopes of collecting the levy payments and devise another way to finance its operations, Kaul said.

Cocoa Sale Suggested

“This proposal is a drastic measure that people had not been expecting,” she said. “In effect, this would be the end of the ICO pact.”

The secretary suggested, as a financing alternative, that the ICO sell a total of 25,000 metric tons of buffer stock cocoa over the next two marketing years.

Such an action would have little impact on prices, Kaul said, citing the 200,000-ton surplus expected in the 1988-89 year. But the psychological impact of abandoning the current financing agreement would be enormous, she said.

Although the producers are not likely to ever pay all they owe, “by keeping up the pretense of asking them for the levy, it keeps up hope of some negotiated compromise down the road,” she said.

ICO members will discuss the proposal at a two-week meeting in London that begins Sept. 5, she said.

Firm demand and expectations of declining supplies boosted cattle futures on the Chicago Mercantile Exchange but the pork complex finished mixed on the belief that larger numbers of hogs would soon be heading to market, analysts said.

Live cattle settled 0.05 cent to 0.87 cent higher, with October at 72.97 cents a pound, a new contract high; feeder cattle were 0.20 cent to 0.53 cent higher, with September at 82.25 cents a pound; hogs were 0.10 cent lower to 0.20 cent higher, with October at 41.05 cents a pound, and frozen pork bellies were 0.03 cent to 0.33 cent lower, with February at 54.82 cents a pound.

Dull Trading Session

Grain and soybean futures settled mostly lower in light profit taking on the Chicago Board of Trade in the absence of influential news, analysts said.

“It was a dull session with further erosion of values,” said Ben George, a Merrill Lynch Futures Inc. grain trading specialist on the exchange floor.

Wheat settled 3 cents to 4.5 cents lower, with September at $3.90 a bushel; corn was 3.5 cents lower to 2.75 cents higher, with September at $2.7725 a bushel; oats were unchanged to 0.5 cent higher, with September at $2.54 a bushel, and soybeans were 4 cents lower to 7.5 cents higher, with September at $8.315 a bushel.

Precious metals futures fell modestly on New York’s Commodity Exchange.

Gold settled 70 cents to 80 cents lower, with October at $435.60 an ounce; silver was 5.5 cents to 5.6 cents lower, with September at $6.66 an ounce.

Oil futures prices finished higher on the New York Mercantile Exchange in sporadic trading, bouncing back from a steep slide the day before.

West Texas Intermediate crude oil was 3 cents to 6 cents higher, with October at $15.34 a barrel; heating oil was 0.22 cent to 0.36 cent higher, with September at 42.67 cents a gallon, and unleaded gasoline was 0.15 cent to 0.50 cent higher, with September at 46.79 cents a gallon.

On the Chicago Mercantile Exchange, the contract for September delivery of the Standard & Poor’s 500 stock index settled unchanged at 259.70 points.

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