Prepared by Dean Witter, Inc.

COPPER: Prices eased steadily throughout the session reflecting freer lending along with the ongoing build in LME stock levels which rose by 1,950 tonnes. Values look poised to test support near the 2225 level on three months and near the 102 level basis September as sluggish demand and further production growth continues to weigh on values.

The energy complex traded in a rather mixed fashion with follow-through buying in gasoline supporting values throughout the complex early. However a lack of fresh buying interest at the higher levels left the market vulnerable to profit-taking.

Early buying interest continued to be linked to strength in gasoline where follow-through buying emerged in response to the unplanned maintenance shutdown at Baytown. The strength to values failed to attract buying interest at the higher levels and scattered profit-taking emerged. Despite the setback, values are likely to find good support on pullbacks toward the 19.80 level basis September. Reports that Iraq will likely forfeit 50% of their first half of their allotment could provide the basis for underlying support.

In products, good buying interest should develop near the 55.30 basis September heating oil. Although cash demand remains sluggish, we look for better buying interest to develop. The 90-day weather outlook indicated below normal temperatures for the North East which might help attract demand into the complex. In gasoline, the market appears likely to correct from the overbought condition currently prevailing. Strength to values might be fleeting as demand begins to slacken as we move into the fall.

For we would not be surprised to see additional strength emerge with potential for values to move up toward the 20.50 level basis September and possibly as high as 21.25-21.50. In heating oil, we look for values to test the 58.00-cent level basis September.

NATURAL GAS: Natural gas prices incrementally advanced the recent pull-back low and were under significant pressure into the close, but may be poised to rotate higher. Despite apparent weakness, two factors support a stable, positive trade. First, longer-term weather is supportive with futures pricing in higher levels and cash following. Second, the pull-back from the 2605 high has been orderly. The key 2380-2420 zone has held for two sessions with much less interest than anticipated in breaking the market when the opportunity arose. Intra-day activity from yesterday actually supports another test of 2515 and 2550, the last resistance before 2661, 2667 and 2690.

On the downside, the weekly and monthly charts are increasingly dependent on upside follow through and failure to maintain 2380 could unfold to 2260.

COTTON: The market traded in a rather quiet fashion consolidation following the sharp gains recently. Underlying support continued to be apparent from trade despite indications of additional rainfall for the Delta. Expectations of a favorable export sales report might have helped underpin values. We still hold a bullish bias and see values eventually moving toward the 77-78 cent level basis December.

SUGAR: Prices traded unchanged most of the day before a late session rally pushed values higher by the close. Initially the market failed to respond to the Czarnikow 1997/98 world sugar production estimate of 123.3 mmt and a consumption estimate at 124.4 mmt. The lower production estimate is likely a reflection of the smaller crops expected out of Thailand and India whose production is expected to decline 12% and 16% respectively. However in late session trade, renewed trade house buying emerged to push values back over 11.50 basis October to a high of 11.57 by the close. Of importance to the market will be tomorrow's Commitment of Traders report which will likely show that large specs have reduced their the sizable net-long positions which would be slightly bearish. Once again the overall fundamental situation is still constructive for prices to continue to nudge higher and remain firm near term.

COCOA: Prices traded lower and remained under pressure most of the session to close lower on the day. The weakness developed in response to mostly currency factors as the pound sterling was stronger against the U.S. Dollar and the other European currencies. Otherwise there was no additional fundamental information to drive the market today as most are anticipating the next round of crop estimates out of the Ivory Coast to provide direction. Overall, the choppy trade behavior continues to persist amid the ongoing uncertainty over new-crop prospects. Once again, prices still need to hold the 1450-1480 area basis September in order to avert any further liquidation toward the 1420 level.

COFFEE: The market remained in a narrow ranges most of the session before settling moderately higher on the day. On light short-covering activity, prices made modest attempt to recover by touching a high of 186.75 although follow through was lacking and prices faded in to the close. Once again the prices weakness is precipitating from the absence of any follow up news in regards to supply fears as well as the penetrating of key support in the 193- 195 area. The talk of Central American and Colombia supply tightness has basically faded in the background which has left prices to drift to retest the lows. At this point it appears that prices are poised for further near-term loses back toward the 175- 170 area basis September.

FROZEN CONCENTRATED ORANGE JUICE: Light profit-taking developed ahead of the private crop estimate expected to be released tomorrow. The estimate is expected to show a Florida crop of between 220-240 mb. We doubt a bearish report will have considerable impact on prices and suspect sharp declines will encounter good trade support on the belief that Brazilian availability might dry up at significantly lower levels.

Prices started sightly lower across the floor with wet weekend weather in the Midwest and latest weekly sales weighing on values again today. The exception was August beans which quickly rallied on a lack of offers and continued strength in the cash market due to strong domestic and foreign demand against tight U.S. supplies, but lackluster corn, beans and meal sales limited new crop's strength today. August beans enthusiasm waned after midday, too, when commercial selling appeared.

Today's better-than-expected wheat and bean oil levels provided some modest early support, but limited export prospects after last week's surges weaken these pits midday. Corn/wheat spreading also weighed on the bread grain after midday. Reports that China could still possibly produce a 118 mmt crop and had likely also sold up to 1 mmt nearby supplies recently also limited corn early, but MLP buying 15 mil corn today, mainly December and July, after selling 35 mil between December and March yesterday and Tuesday low 97/98 corn production estimate let this pit bounce higher after midday.

Late strength in bean oil when South America broker bought and November beans holding 605 again today sparked a late short-covering bounce in beans, but most other pits continued to drift to a lackluster mixed close instead.

SOY COMPLEX: Beans had a wild day. Some exporters boasting their basis 20 to 30 cents trying to secure enough old-crop supplies to meet the previous 3 weeks of aggressive sales shot August sharply higher early. This enthusiasm didn't last when Dreyfus and other commercials sold August and did some back spreading, prompting the floor to think the squeeze might be over. With numerous vessels now in port and only 4 days left before August goes off the board, this could be a head fake by exporters. Since they still likely have 40-50 mil beans yet to ship by mid-September, August remains the best mechanism to secure supplies either through larger country sales or attracting deliveries. The 28 mil shorts which began today's August trading seem the most vulnerable since most don't have beans to deliver.

This tug-of-war is important since it likely limits November's downside until August goes off the board. Tonight's 30- and 90-day Midwest outlook continued the NWS's recent cool and North American rain projections through the fall which is a bit positive for production, but this is also negative to get this fall's harvest in the bin. Friday morning's weekly and monthly NOPA crush data will also be influential for opening. 22.7-23.6 mil and 102.3-103.5 mil are the trade ideas which would be lower than previous week and month levels, but still paces to achieve USDA's 1.425 estimate. Because of this situation, we remain content with November longs using a 595 stop, but this week end's ECB rainfall will also be important factor for 640 push so keep nimble.

CORN: Today's corn action was also a bit of surprise given Wednesday's double top in December. Since corn could have quite a different price outlook if the USDA is anywhere close to being right about U.S. and China production, most traders didn't want to pound the market. With central Illinois and western Indiana still needing good rains from this weekend's system to stabilize yields and Pro Farmer Tour next week possibly giving them more information concerning production, December is likely in 260-70 range for now.

WHEAT: This market continues to struggle between the less- than-enthusiastic short term and the positive price outlook because of less production from our major world export competitors longer term keeping WU in a 350-70 range for now.

August 14, 1997 Dean Witter, Inc.

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Consensus National Futures and Financial On Line Index
Financial Commentary Index

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