950819

Cotton rises

limit as heat

pests threaten

CHICAGO: Cotton on the New York Cotton Exchange surged the 2-cent-per-pound trading limit Friday as heat and pests threatened crops in several key producing states.

"There do appear to be some yield problems and that is forcing the market higher," said Steve Platt, softs analyst for Dean Witter, citing insect infestations in Mississippi and Arkansas. He said fresh buying by commodity funds added fuel to Friday's run up.

Also "it looks like investors are expecting continued dryness," said Bob Hafer, director of research for Knight-Ridder's Commodity Research Bureau.

But analysts remained cautious.

Smith Barney agricultural products analyst Walter Spilka said the situation is "a bit iffy, but it's not the end of the world." Spilka said there are still prospects for a large cotton crop and sees prices as very expensive right now.

NYCE cotton futures Friday closed up the 2.00 cent per lb limit with most active December at 78.55 cents per lb.

The Knight-Ridder Commodity Research Bureau Index of 21 futures prices finished the day at 237.33, up 1.81 points, aided partly by the rise in cotton combined with gains in silver, sugar and crude oil.

Silver on New York's Commodity Exchange closed sharply higher but showed signs of stalling during the session, with investors wary that the recent bull move was triggered by temporary tightness in supplies.

"It's a very dangerous market," said Merrill Lynch senior futures strategist William O'Neill.

Silver this week has been propelled by widespread speculation that nearby supply shortages are due in part to one or more players attempting to squeeze silver supplies.

"There's plenty of silver around," said Refco Inc. analyst James Steel. "The market's just in disequilibrium regionally and it won't take long for that to be sorted out."

COMEX September silver settled 11.7 cents higher at $5.697 cents an ounce.

Crude oil on New York's Mercantile Exchagne ended higher on news the United States intends to widen its military exercises in the Middle East to include Kuwait.

But gasoline futures ended lower ahead of the expected decline in seasonal demand and after news of further regulatory changes affecting NYMEX's New York Harbour reformulated gasline (RFG) contract.

September crude ended up 21 cents at $17.87 a barrel. September gasoline ended down 6 cents at 54.23 cents a gallon and heating oil ended up 0.43 cent at 49.70 cents a gallon.-Reuter