COMMODITIES : Coffee Futures Soar on Signs of Price Pact
Coffee futures prices surged Tuesday on New York’s Coffee, Sugar & Cocoa Exchange on indications that a new coffee price support agreement was near.
On other markets, sugar futures soared, energy futures retreated, copper and precious metals advanced, frozen pork bellies plunged, livestock were mixed, grains and soybeans were mixed and stock index futures retreated.
News arrived in New York at midday from the International Coffee Organization’s meeting in London that Brazil and Colombia, respectively the world’s No. 1 and No. 2 coffee producers, had proposed an initial global export quota of 54 million bags for the 1988-89 marketing year.
The reports sparked high-volume buying of coffee futures by roasters and speculators on the premise that the proposal could become the cornerstone of a new ICO agreement for stabilizing coffee prices in the upcoming marketing year, which begins Oct. 1.
“This was significant not only in that these two countries have agreed on something but in that it sets the tone for the conference as a whole,” said Arthur Stevenson, coffee market analyst in New York with Prudential-Bache Securities Inc. “It indicates the meeting is progressing harmoniously.”
Under the proposal, coffee producers would limit sales to ICO consumers to 54 million bags during the marketing year, compared to this year’s initial quota of 58 million bags. The ICO can adjust the quota upward or downward during the year, depending on market conditions, to keep prices stable.
Global coffee consumption is declining, but demand for higher-priced “mild” coffees--as opposed to the more plentiful “robusta” coffees--is on the rise.
Stevenson said consumer nations might agree to the lower quota, which would tend to support prices, if producers agree to increase the percentage of milds in the export mix.
Sugar Futures Rebound
Coffee settled 2.15 to 2.83 cents higher, with the contract for delivery in December at $1.2924 a pound.
Sugar futures recovered nearly all of Monday’s sharp losses on buying inspired by technical factors and rumors of physical sugar purchases by China and the Soviet Union, Stevenson said.
Sugar settled 0.37 to 0.69 cent higher, with October at 9.86 cents a pound.
Crude oil futures dipped to two-year lows below $14 a barrel early in the session on the New York Mercantile Exchange but recovered to finish only slightly lower than Monday’s final prices.
Copper futures posted new contract highs in most delivery months for the fourth straight day on New York’s Commodity Exchange on continuing concern about tight supplies and rising demand.
Precious metals futures also advanced on the Comex, buoyed by the stability in the oil market, analysts said.
Gold settled $2.10 to $3 higher, with October at $397.90 an ounce; silver was 5.5 to 6 cents higher, with September at $6.166 an ounce.
Frozen pork bellies for February and May delivery settled down the allowable daily limit of 2 cents a pound on a technically inspired selloff on the Chicago Mercantile Exchange, analysts said.
Stock index futures retreated on the Chicago Mercantile Exchange, where the contract for December delivery of Standard & Poor’s 500 stocks settled 1.45 points lower at 270.50.