COMMODITIES : Cotton Up Its Daily Limit on Rumor of Chinese Deal
Prices of cotton futures soared the permitted daily limit of 2 cents a pound Thursday on the New York Cotton Exchange amid rumors that China, normally a cotton exporter, had purchased as much as 100,000 bales of U.S. cotton.
On other markets, cocoa futures tumbled, livestock and meat advanced, grains and soybeans were mixed, energy futures gained, precious metals were mixed and stock index futures were slightly higher.
Cotton settled 1.88 to 2 cents higher, with the contract for delivery in March at 58.13 cents a pound.
The gains followed two days of losses, including a steep slide of 1.82 cents in the March contract’s price Tuesday after the National Cotton Council proposed that the Agriculture Department take steps to lower the price of U.S. cotton on the world market to make it more competitive.
Rumors that China had purchased 70,000 to 100,000 bales of U.S. cotton filtered into the market early in Thursday’s session, right after a Chinese newspaper’s report that China’s 1988 cotton production totaled 4.01 million metric tons, a 4.3% decline from 1987.
Ernest Simon, cotton specialist with Prudential-Bache Securities Inc., said that while there was no confirmation of the Chinese buying, “from my friends in the trade, I can tell you it’s pretty definite they did take some cotton.”
Judith Ganes, a New York-based analyst with Shearson Lehman Hutton Inc., said the strong rally also reflected the realization that any moves by the USDA to lower the adjusted world price of U.S. cotton would have no effect on current crop prices.
Overall, she said, the supply and demand factors for U.S. cotton are “overwhelmingly bearish,” with a huge surplus and record supplies expected this year.
Cocoa futures fell sharply on New York’s Coffee, Sugar & Cocoa Exchange as bearish fundamentals reasserted themselves in the market.
Prices had rallied Tuesday on confirmation that the French trading house Sucres et Denrees had bought 400,000 metric tons of cocoa from the Ivory Coast, the world’s largest cocoa producer.
The purchase was believed to be part of a secret deal whereby the French government would subsidize the withholding of 200,000 metric tons of the Ivorian cocoa from the market for two years to help stabilize prices.
But with worldwide cocoa supplies far outstripping demand, Ganes said many traders doubt that France will keep the high-quality Ivorian cocoa warehoused.
“It’s expensive to finance it and, especially if prices drop, they’re sitting on an expensive bundle,” she said.
Cocoa settled $49 to $80 lower, with the March contract at $1,433 a metric ton.
On the Chicago Mercantile Exchange, pork futures finished substantially higher, buoyed by strong spot markets and expectations for a bullish USDA quarterly hogs and pigs report on Friday. Most cattle futures also rose.
Live cattle were 0.10 cent lower to 0.15 cent higher, with February at 73.45 cents a pound; feeder cattle were 0.10 to 0.30 cent higher, with January at 84.45 cents a pound; live hogs were unchanged to 0.48 cent higher, with February at 46.95 cents a pound, and frozen pork bellies were 0.48 cent to 1.03 cents higher, with February at 44.35 cents a pound.
Corn futures finished moderately higher on the Chicago Board of Trade in a late rally fanned by rumors that the USDA planned to increase to 20 million metric tons from 16 million metric tons the maximum amount of U.S. grain that the Soviet Union can purchase annually under the U.S.-Soviet long-term grain agreement.
Wheat settled 0.75 cent lower to 1 cent higher, with March at $4.4825 a bushel; corn was 1 cent to 3.75 cents higher, with March at $2.8675 a bushel; oats were 0.50 cent lower to 1 cent higher, with March at $2.45 a bushel, and soybeans were 4.50 cents lower to 2.50 cents higher, with January at $8.13 a bushel.
In energy futures trading on the New York Mercantile Exchange, West Texas intermediate crude oil settled 16 to 34 cents higher, with February at $17.42 a barrel; heating oil was 0.56 to 0.80 cent higher, with February at 53.47 cents a gallon, and unleaded gasoline was 0.03 cent lower to 0.12 cent higher, with February at 47.40 cents a gallon.
On New York’s Commodity Exchange, gold settled 80 to 90 cents lower, with February at $410.10 an ounce; silver was 2.5 to 2.8 cents higher, with March at $6.05 an ounce.
Stock index futures finished mostly higher on the Chicago Mercantile Exchange, where the contract for March delivery of the Standard & Poor’s 500 index settled 0.10 point higher at 283. Each point is worth $500.
Tables, Page 8