THE OCEAN FUTURES MARKET attempted to bounce upward last week, but failed and slipped backto the lows set early the previous week.

In retrospect, the buying frenzy that began May 4 and continued into the beginning of last week was mainly short covering. Traders with "short" positions in place, who would gain in a falling market, decided their profits were ample and bought futures to lock in their winnings. They also expected that the Soviets might charter vessels and drive the market upward.The Soviets in fact did charter more shipping capacity last week than in the preceding few weeks (based on reported fixtures, which represent some fraction of what is actually fixed). But the supply of dry bulk shipping capacity already exceeds demand by so much that the Soviet activity was not enough to tighten up the freight market. Indeed, the hire rates ontimecharter trips reported last week were in the low $9,000-a-day vicinity, within a few hundred dollars above the recent lows on such vessel employment.

So if this is a column about futures, why do I talk about the spot market?

What occurs in the futures arena is based largely on perceptions, and what people think might happen. The reports of a large Soviet grain purchase caused some traders to believe that a big chartering spree was about to unfold. When it didn't, the result was a large sell-off later in the week, bringing expectations about the freight market, quantified in the form of futures prices, down to the levels of the previous week.

In each of the past four weeks, the Soviets might have chartered 10 Panamax vessels at hire rates under $10,000 a day. If so, then they already would have lined up some 2 million deadweight tons of ships for May and June, prior to announcing their large corn and wheat purchases.

Last week's comments about the crystal ball disturbed some readers. The futures brokers never have claimed to know everything that will happen, although I am very flattered that a few readers who got offended actually thought so.


BFI Spot Price: 1313 May 1290 June 1217 July 1115

Oct. 1214 Jan. 1240