Prepared by Dean Witter, Inc.

COPPER: The market traded in a rather weak fashion as early strength quickly faltered. The pressure on values appeared to be linked to overhead producer selling along with the build in LME stock levels. Overall, we see the market as likely limited as pressure rebuilds in the absence of fresh draws in stock levels. For December copper we would look for values to encounter fresh resistance near the 96.30 level basis December and see the potential for values to test the 93.00-cent area basis December.

Prices rallied sharply following reports that Iraq might sever cooperation with the UN arms inspectors. These statements helped build on early strength which was linked to the API report and the draw in crude inventories.

The failure of the market to make downside progress might support the belief that against 20.50 the market attained an intermediate low. This will likely be contingent upon the progression of events in Iraq. Subsequently, the market will likely be rather cautious as long as Iraq continues to show a belligerent attitude toward fulfilling UN resolutions. While we are doubtful this will have any impact on the oil-for-aid deal, Iraq has indicated a reluctance to renew the oil-for-aid deal in December.

For product markets, reports of tight storage hindering movement of product in the Northeast will likely be a source of concern in the absence of higher usage rates. The long-term forecast released today is unlikely to be seen as supportive with the Northeast forecast to be above normal from December-February. In the absence of high usage rates the heating oil market is vulnerable to additional losses in the absence of fresh tensions emanating from the Mid East.

Natural gas finished higher, continuing this week's trend toward tight ranges reflecting balanced fundamental information and the AGA report.

This week's reading was 77 bcf, at the low end of the 65-90 expectation.

Other outside influences were the slowdown in nuclear plant activity in India balanced out by tepid cash demand on talk of lower than expected demand and questions of cost effectiveness of substitute products. The technical outlook reflects this pause, or neutral zone as normal development. However, such slow activity could represent the calm before the next move. Basis the December contract, this is the decision zone between an attack on 3250, 3340 and the high for the move at 3500, or failure through the recent area of development, confirmation of an interim top at 3500 and progress to the 2600-2650 area. Perhaps the upcoming 13-day forecast will be the catalyst, or the expiring November contract. Again basis December, prices are in position to advance first, and the next larger move could hinge on a test of last week's high of 3250.

COTTON: Prices attracted light support in anticipation of strong export sales. Expectations generally point to sales between 150-250 thousand bales with further purchases by China likely. Nevertheless the recovery continued to be restrained by the appearance that yields are above USDA forecasts for certain growing areas. Near term we look for support toward the 70.80-71.00 cent level basis December.

SUGAR: Prices sold off throughout the session before settling lower on the day. Weakness developed in response to the general absence of fresh fundamental news which left prices to drift and fall back below 11.80 basis March. However, key support at the 20-day moving average of 11.70 was able to be maintained and keeps prices in a position to move higher. Once again, we see the prospect for prices to remain firm, but values will likely continue to encounter difficulty in regaining the 12.00 level due to lack of bullish fundamental news.

COCOA: The market failed to follow through and subsequently declined and closed lower on the day. The selling developed ahead of tomorrow's release of 3rd-quarter U.S. grind figures which will likely show only a modest increase over the previous year. Estimates range between a 3-5% increase in contrast to 1st and 2nd quarter increases of 20% and 17.5% respectively. The recent erratic trade behavior is generally a reflection of uncertainty over West African crop prospects as harvest begins to pick up in that region. Furthermore participants are more interested in the release of the early arrival figures which will give a better indication of what total output will be. In general,the outlook remains constructive for prices longer term underpinned by continued reports of a sharp decline in Indonesian production as well as more talk of a sizeable world cocoa deficit for 1997/98.

COFFEE: Early support linked to the GCA figures failed to be maintained. Instead active selling interest developed reflecting harvest pressure, favorable crop prospects for Brazil along with weakening differentials on the anticipated increase in supplies. The breakdown should lead to a test of the 1.50-level basis December.

FROZEN CONCENTRATED ORANGE JUICE: Good support continued to develop reflecting bargain hunting buying along with ideas offering from Brazil might dry up from current price levels. Although the recovery still looks rather tenuous, we would expect the market might be poised to recover up to resistance near the 69- 70 cent level basis November.

After a steady to easier opening, the CBOT tried to strength on Thursday, but only beans and bean oil were higher much of the day while the rest of the floor was lower. A cancellation announcement of 100,000 unknown destination bean sale by the USDA weakened this pit on the opening, but a strong U.S. export pace in meal and lower than expected U.S. bean oil stocks at processors on today's September NOPA crush report quickly helped the complex recover. The EU only approving modest 130,000 stock sales at 6.47 ECU also helped lift wheat after the opening.

Overnight El Nino talk also lent support to corn and wheat early, but limited nearby export demand and a big harvest weekend being expected weakened grain's prices after mid-morning. Further talk about Chinese cancellations also weakened meal after mid-day along with local oil/meal spreading because of today's unexpectedly large bean oil drop of 195 million pounds to 1.190 billion from strong late season demand.

Modest fund buying lent support to beans during today's session, but they were mixed in the products–buying bean oil, but selling meal. Funds were on both sides of corn and wheat. On the day, commercials were evenly divided in wheat, sellers in corn, and small sellers in the soy complex. Long speculative liquidation and Cargill corn and bean selling weakened many pits to new lows late, except bean oil.

SOY COMPLEX: The market will be watching morning weekly export sales and NOPA crush for direction. Two schools of thought exist for exports which range from 250-700k in beans, 75-200k in meal and 10- 40k in bean oil. We favor the low side of these estimates at 250- 400k in beans, 75-125k in meal and 10-15k in bean oil because of last week's strong rally keeping many buyers on the sidelines. A strong 30-31 million NOPA crush is also expected with this pace likely to expand to 33-34 soon.

Despite Chinese cancellation talk, Asia and South America still don't have alternates to buy from anywhere else until March 1998 so we still anticipate their buys on pullbacks. Big production ideas are already coming out of South America (29-30 mmt in Brazil and 14 mmt in Argentina) which will be needed in 2nd half of the year because current strong world demand, but current diverse conditions in South America of too dry in Mato Grasso, too wet in RGDS, dryness in Cordaba and Santa Fe and excess moisture in BA will likely cause at least one planting scare in South America between now and early December. Still looking to buy break in 688-98 range with risk point at 673 for rally to last spring's 740-50 highs by late November. Because of the limited chance to cut the U.S. carry over below 200 million in 97/98, we wouldn't hold any more than 30-40% of 1997's crop in bin after this possible push for spring rally.

CORN: This pit tried to hold together, but evening up ahead of Friday's weekly export sales and concerns about the biggest harvest weekend of the fall eventually weakened values by the close. U.S. progress likely 52- 55% by Monday. Export estimates also vary widely between 300-1 mmt in this pit, but we're cautious about 300-500k level because of buyers not wanting to chase last week. With possible lower November production and world buyers not covered, still like 280-83 as buy with stop below 275 for push to 310-15 on normal post-harvest rally to Thanksgiving.

WHEAT: With modest 250-400k export talk for Friday, this pit also slipped back late. Looking at 358-62 December buy with 347 stop for seasonal 385-400 rally.

October 16, 1997Dean Witter, Inc.

150 South Wacker Drive, Chicago, Illinois

Financial Commentary

COMMODITY FUTURES FORECAST WEEKLY REPORT | DEAN WITTER FUTURES COMMENTARY
THE LATEST COMMITMENT OF TRADERS ANALYSIS FOR CURRENCY CONTRACTS
MYERS ON FUTURES | NIKKO MARKET COMMENTS
SCHAEFFER'S RESEARCH REVIEW
FED PRICES SLIDE BACK TO $65
MONEY VERSUS DEBT TWO AGGREGATES DIVERGED
STOCKMARKET CYCLES | WEEKLY OUTLOOK
INTEREST RATE WATCH | THE ALLENDALE ADVISORY REPORT
NIKKO MARKET COMMENTS | THE REAPER

Consensus National Futures and Financial On Line Index

Copyright 1997, by Consensus Inc.  All American and Pan American rights Reserved. editor@consensus-inc.com

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