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Cotton Rockets Back on Strong Demand Signals

February 2, 1995

Cotton futures prices rocketed back from a two-day slide Thursday amid signs world demand for U.S. cotton remains strong.

Elsewhere, gasoline futures fell sharply on news New Jersey would start selling a grade of gas cheaper than that traded on the New York Mercantile Exchange.

The Commodity Research Bureau’s index of 21 commodities rose 0.89 point to 233.31.

Cotton for March delivery leaped 2 cents, the permitted daily limit on the New York Cotton Exchange, to 94.1 cents a pound.

Cotton had fallen 2.6 cents after reaching a 14-year high of 94.7 cents a o pound Monday. Prices have been driven higher by strong export demand as a result of tight world stocks.

Analyst Sharon Johnson of Frank Schneider & Co. in Atlanta predicted further gains Friday in reaction to an Agriculture Department report released after the close that showed net export sales of 115,000 480-pound bales last week despite high prices.

Export commitments for the current August-July crop year now total 10.5 million bales, more than the 9.2 million the USDA estimated in its January crop report.

``The USDA will have to raise their estimate, which will further reduce ending stocks,″ Johnson said.

China has bought about 2 million bales of U.S. cotton this year, with more than half of it yet to be shipped. With such large outstanding commitments, traders doubted cotton shipments to China will be halted as part of the trade sanctions threatened by the Clinton administration if the countries are unable to agree on measures to curb Chinese pirating of copyrighted U.S. movies, music and software by a Saturday deadline.

``I don’t see what point would be served in shutting down their textile mills,″ said David Branden, a cotton specialist with Smith Barney Inc. in Memphis, Tenn. He noted the United States is one of the biggest buyers of Chinese-made textiles, which have been mentioned as possible sanction targets.

Gasoline futures prices fell sharply on the New York Mercantile Exchange after a delayed opening caused by New Jersey’s plan to sell a cheaper, more polluting grade of gas two months earlier than expected.

Traders feared a drop-off in demand for the less-polluting grade traded on the exchange.

New Jersey Gov. Christine Whitman said she will ask the U.S. Environmental Protection Agency to allow the state to sell the cheaper gas in the northern half of the state on March 1 instead of May 1.

EPA requires states to sell the lower polluting gas in regions with dirty air during the winter months, but Whitman is asking for a waiver of the rule to make the gasoline grade consistent with that sold in the southern half of the state.

The waiver, which EPA has indicated it may grant, would allow New Jersey to sell gasoline with a chemical additive called an oxygenate at a level of 2 percent instead of 2.7 percent. The Nymex trades the lower-polluting, 2.7 percent gas until May 1. The switch by a large, influential state like New Jersey could significantly cut demand for the Nymex-grade gasoline since other states may follow.

Unleaded gasoline for March delivery dropped 0.82 cent to 55.95 cents a gallon; March light sweet crude oil rose 2 cents to $18.54 a barrel; March heating oil rose 0.75 cent to 48.55 cents a gallon; March natural gas rose 4.5 cents to $1.435 per 1,000 cubic feet.

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