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.