COMMODITIES : Dry Weather Fears Push Grains Higher
Soybean and corn futures closed dramatically higher Monday on the Chicago Board of Trade with some contracts up the limit allowed for daily trading as dry weather fears kicked the grain markets into a frenzy.
Wheat futures also closed sharply higher.
On other markets, cotton futures advanced the limit on weather concerns; precious metals were mixed; cattle futures advanced; oil futures were higher, and stock index futures rose.
Buyers dominated the grain markets from the opening bell as traders returned from a weekend that saw less rain than expected in most of the Midwest’s corn and soybean areas.
New forecasts issued in the morning predicted dry conditions until at least mid-week. The National Weather Service’s 6- to 10-day forecast, issued after the close, called for below normal rainfall from May 22 to May 26 in most of the Midwest.
Soybean futures prices, now at four-year highs, are extremely sensitive to weather factors because U.S. soybean stockpiles are dwindling and a good crop is needed to meet the anticipated demand, analysts said.
Some soybean and corn contracts were up the limit before noon. The exchange permits soybean futures prices to rise or fall no more than 30 cents a bushel a day, while corn futures are limited to moves of 10 cents a bushel.
With most soybean contracts for 1989 delivery trading above $7.90 a bushel, trader Victor Lespinasse of the investment firm Dean Witter Reynolds Inc. said $8 soybeans are likely.
Moderate Price Movement
“Then my goal is $10, assuming the weather remains a little drier than normal,” he said.
The Agriculture Department reported Monday that corn planting was about 88% complete by Sunday while just under 40% of the U.S. soybean crop had been planted, so no real damage has been done yet by dry weather, said Cathy Leow, assistant vice president for grain trading at Thomson McKinnon Securities Inc. in New York.
Leow predicted more moderate price movement in the soybean market for today and Wednesday.
“I think we’ve moved enough for the next three days,” she said.
Wheat settled 13 cents to 14 cents higher, with the contract for delivery in May at $3.19 a bushel; corn was 8.50 cents to 10 cents higher, with May at $2.07 a bushel; oats were 6.50 cents to 7.50 cents higher, with May at $1.6375 a bushel, and soybeans were 28.25 cents to 30.50 cents higher, with the May contract, on which the daily price limit has been removed because of the contract’s upcoming expiration, at $7.50 a bushel.
Dry weather in the Mississippi River Delta region spurred a surge in cotton futures on the New York Cotton Exchange, where most contracts traded up the 2-cents-a-pound daily limit.
The July cotton contract settled 1.46 cents higher at 66.61 cents a pound.
Despite the inflationary implications of Monday’s broadly higher commodities futures prices, precious metals had a mixed day on New York’s Commodity Exchange. Gold finished modestly higher and silver was moderately lower.
Precious metals futures closed well below their highs of the day. Traders may have taken profits and squared their positions late in the session ahead of the government’s balance-of-trade report, due out today, said Craig Sloane, an analyst in New York with Smith Barney, Harris Upham & Co.
Gold settled $1.70 to $2.70 higher, with May at $454.90 an ounce; silver was 4.4 cents to 5 cents lower, with May at $6.583 an ounce.
Livestock and meat futures settled mixed on the Chicago Mercantile Exchange ahead of the USDA’s monthly seven-state cattle-on-feed report, which was released after the close.
The report showed 4% more cattle being fattened for slaughter on May 1, compared to a year earlier. The number was within the market’s expectations.
The report also showed 9% fewer feedlot placements and 5% more cattle marketed in April. Those numbers were construed as positive by analysts, who predicted higher futures prices for today.
Live cattle settled 0.55 cent lower to 0.65 cent higher, with June at 73.25 cents a pound; feeder cattle were 0.12 cent to 1.07 cents lower, with May at 80.65 cents a pound; hogs were 0.15 cent lower to 0.25 cent higher, with June at 53.55 cents a pound, and frozen pork bellies were 0.55 cent lower to 1.05 cents higher, with May at 54.12 cents a pound.
Energy futures settled higher on the New York Mercantile Exchange in reaction to new Iraqi attacks on Iranian targets in the Persian Gulf, analysts said.
West Texas Intermediate crude oil settled 17 cents to 24 cents higher, with June at $17.66 a barrel; heating oil was 0.51 cent to 0.58 cent higher, with June at 47.98 cents a gallon, and unleaded gasoline was 0.39 cent to 0.49 cent higher, with June at 52.73 cents a gallon.
Stock index futures settled moderately higher on the Chicago Mercantile Exchange, where the contract for June delivery of the Standard & Poor’s stock index finished 2 points higher at 259.55.
