COMMODITIES : Coffee Futures Soar Despite Rain in Brazil; Sugar Slides
Prices of coffee and cocoa futures rose sharply Tuesday while prices for cotton, sugar and orange juice futures plunged.
On other markets, energy futures advanced; precious metals, grain, soybean, livestock and meat futures were mixed, and stock index futures retreated.
On New York’s Coffee, Sugar & Cocoa Exchange, coffee settled 2.5 to 6.56 cents higher, with the March contract at $1.659 a pound, the highest price for coffee futures since Nov. 13, 1986.
Prices rose despite weekend showers in the major coffee-growing region of Brazil, the world’s largest producer.
The rain came too late to reverse drought damage to the Brazilian crop, said analyst Kim Badenhop of Merrill Lynch Capital Markets Inc. in New York.
He said strong demand was the driving force behind Tuesday’s sharp gains. The winter months in the Northern Hemisphere mark the annual peak in world coffee consumption, and coffee-producing countries typically under-ship their International Coffee Organization quotas to exploit the surge in demand.
“It happens every year at this time,” Badenhop said. “Then in May, June, you’ll see exports start to accelerate as they try to meet their quotas.”
Prices of world sugar futures plunged the permitted daily limit of 0.50 cent a pound, with the limitless contracts for March and May deliveries dropping 0.78 cent and 0.76 cent, respectively. March sugar settled at 10.37 cents a pound.
The selloff was mostly technically inspired, with no fresh supply-demand news in the market, analysts said.
But Judith Ganes of Shearson Lehman Hutton Inc. in New York said lower prices could bring some of the physical buying that many players have expected.
“Everyone’s waiting for the Soviet Union and China to buy to bridge their domestic shortfalls,” she said. “After this drop in price, it might become attractive to them to enter the market.”
Cocoa rose $29 to $39, with March at $1,539 a metric ton, on confirmation that the Ivory Coast, the world’s largest producer, had sold 400,000 metric tons of cocoa to a French trade house. That apparently put into motion a complicated plan for withholding Ivorian cocoa from world markets.
Cotton fell 1.15 to 1.82 cents on the New York Cotton Exchange, with March settling at 56.67 cents a pound.
The selloff was sparked by weakening chart signals and rumors that U.S. cotton producers meeting in Nashville, Tenn., planned to ask the Agriculture Department to take action to reduce the price of U.S. cotton on the world market, said Ernest Simon of Prudential-Bache Securities Inc.
Futures prices for frozen orange juice concentrate tumbled 3.45 to 4.20 cents on the Cotton Exchange, with January settling at $1.555 a pound.
Ganes of Shearson Lehman attributed the decline to the extremely mild weather in the Florida orange country during this, the critical freeze period.
She said other fundamental factors governing orange juice prices were bearish and demand was so slow that processors were widely expected to drop their prices.