Cocoa prices soar to eight-week high
Cocoa prices soar to eight-week high
NEW YORK (Reuter): Cocoa prices soared to their highest level in eight weeks on Tuesday amid growing concern that the El Nino weather pattern could put a severe dent in world production.
"All the El Nino stories are coming together. Because of potential problems in Indonesia, Malaysia, (Papua) New Guinea, Ecuador and Brazil you could see 200,000 to 300,000 tons in losses," said Smith Barney analyst Walt Spilka.
El Nino is a warming of the eastern part of the central Pacific Ocean which in the past has disrupted weather patterns around the globe, causing droughts and other unusual events.
"El Nino lasts 18 to 24 months," Spilka added. "It will peak at Christmas and go through the mid-crop into next year's crop, so there's all sorts of bullish potential."
Some traders also linked the rise in prices to talk that U.S.- based crop forecaster Hans Kilian had issued a long-awaited report that was not as bearish as some market participants had anticipated.
While Kilian was rumored to have said the Ivory Coast crop was progressing well, he also reported that an estimated 3 percent growth in world consumption and crop shortfalls in the Far East and parts of South America could lead to a world cocoa deficit of 200,000 tons in 1997/98, traders said.
They said Kilian pegged the Ivorian 1997/98 main crop at 950,000 tons and the total 1997/98 (main and mid-crop) at 1.10 million tons.
"People were expecting something bearish," said one trader. "The Ivorian crop estimate was neutral, but Kilian also said production problems elsewhere would lead to a deficit of 200,000 tons."
No one was available at Kilian's New Orleans office to comment on the report.
At New York's Coffee, Sugar and Cocoa Exchange, cocoa for December delivery closed $38 per ton higher at $1,653, its highest close since July 2.
Corn prices on the Chicago Board of Trade closed sharply lower, weakened by a reported improvement in the condition of this year's U.S. crop and talk of Chinese sales.
"A number of things hit us today and you have to say the crop conditions were a surprise, and when you continue to see China selling into the market that's a negative," said Don Roose, of U.S. Commodities, Des Moines, Iowa.
The U.S. Department of Agriculture said late Monday that as of Sunday 63 percent of the U.S. corn crop was in good to excellent condition, above the 60 percent in that category the previous week.
Talk circulated in the market that China was still selling corn despite dry weather that may reduce its output, sources said.
CBOT corn for December delivery closed 8-1/2 cents a bushel lower at $2.67-3/4.
At the New York Mercantile Exchange, gasoline extended losses for a second consecutive session amid falling cash prices in the New York Harbor.