COMMODITIES : Cotton Futures Plunge Daily Limit
Prices of cotton futures plummeted the permitted daily limit of 2 cents a pound Thursday on the New York Cotton Exchange as fears of hurricane damage to the Texas cotton crop receded.
On other markets, prices for future delivery of oil, precious metals, grains, soybeans, livestock and stocks all declined.
Cotton for October delivery had gained 2.6 cents a pound during the previous two days on speculation that Hurricane Gilbert would strike the Louisiana or northern Texas coastline and damage cotton crops in the Mississippi Delta region.
But the huge storm appeared to be tracking further south Thursday and was expected to do little harm to the cotton crop, analysts said. Sell orders poured into the Cotton Exchange, sending some contracts down the limit in the morning. Prices recovered at midday but closed limit-down in a second round of heavy selling.
“There was a lot of selling coming in, partially profit taking, partially establishing new positions, which says there is no need for cotton to be at these levels,” said Ernest Simon, cotton specialist in New York with Prudential-Bache Securities Inc.
Furious winds and driving rain were still forecast for the southern Texas coastline, but most of the cotton in that area has already been harvested, analysts said.
West Texas Vulnerable
The hurricane poses the worst threat to cotton plants with open bolls that expose the white fibers to the elements.
“Any rain will stress the cotton, discolor it, and dirt will get inside,” said Judith Ganes, an analyst in New York with Shearson Lehman Hutton Inc. “Not only can the crop lose quantity, but the quality is diminished.”
Simon said the only exposed cotton was in western Texas. Most of the cotton in the state’s north-central and west-central regions had not opened yet, and growers there want rain, he said.
Cotton settled 1.90 cents to 2 cents lower, with the contract for delivery in October at 54.85 cents a pound.
The prospects of a major disruption of oil refining along the Texas-Louisiana coast also diminished with the changing hurricane forecasts, sending prices of energy futures down sharply on the New York Mercantile Exchange.
West Texas Intermediate crude oil settled 46 cents to 50 cents lower, with October at $14.90 a barrel; heating oil was 1.16 cents to 1.37 cents lower, with October at 42.70 cents a gallon; unleaded gasoline was 0.48 cent to 1.39 cents lower, with October at 45.63 cents a gallon.
The drop in energy prices reinforced the prevailing bearish attitude among gold futures traders on New York’s Commodity Exchange, where prices dropped to their lowest levels in more than 17 months.
Credit-tightening moves by the Federal Reserve and central banks in Europe have weakened inflationary pressures and dampened investor demand for gold, said George Anagnos, metals analyst with Thomson McKinnon Securities Inc. in New York.
The Commerce Department’s report that retail sales declined 0.2% last month “simply confirmed the precedent of recent economic statistics, which suggest the economy is growing in a more tempered and sustainable fashion,” he said.
Grain, Soybeans Lower
Gold settled $2.70 to $3.50 lower, with the contract for delivery in October at $419.80 an ounce; silver was 2.2 cents to 3 cents lower, with September at $6.467 an ounce.
Grain and soybean futures finished broadly lower on the Chicago Board of Trade after an attempt to rally soybean prices to last week’s highs fizzled, prompting a rapid last-minute selloff.
Fading fears of crop damage from Hurricane Gilbert also fueled the decline, analysts said.
Wheat settled 5.5 cents to 6.75 cents lower, with September at $4.07 a bushel; corn was 2 cents to 5 cents lower, with September at $2.8225 a bushel; oats were 2.5 cents to 4.5 cents lower, with September at $2.65 a bushel; soybeans were 6 cents to 10 cents lower, with September at $8.725 a bushel.
Cattle futures settled mostly lower in line with lower cash prices. Trading was cautious before today’s seven-state cattle-on-feed report from the Agriculture Department.
Hog futures were also pressured by lower cash markets, but frozen pork bellies finished higher in a technically inspired rally, analysts said.
Live cattle were 0.05 cent to 0.18 cent lower, with October at 70.37 cents a pound; feeder cattle were 0.18 cent lower to 0.12 cent higher, with September at 79.75 cents a pound; hogs were 0.60 cent lower to 0.20 cent higher, with October at 37.95 cents a pound; frozen pork bellies were 0.03 cent to 0.50 cent higher, with February at 48.72 cents a pound.
Stock index futures retreated modestly on the Chicago Mercantile Exchange, where the contract for September delivery of the Standard & Poor’s 500 index settled 1.65 points lower at 267.80.
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