COMMODITIES : Futures Spurt as Traders Go on a Buying Spree
Commodity prices surged broadly Tuesday, propelling a key inflation indicator to a three-year high and suggesting that the nation’s financial markets have reached a crossroads, analysts said.
Advances in prices for future delivery of soybeans, corn, oats, hogs, pork bellies and platinum spurred the Commodity Research Bureau’s index of 21 commodities to a 5.50-point gain. The index settled at 248.39, its highest mark since February, 1985, said Stuart Shinbein, senior technical analyst for the private, New York-based advisory service for commodities traders.
Futures on wheat, cattle, oil, gold, silver, stocks and bonds also moved higher.
A concurrent rise in stock index and U.S. Treasury bond futures is unusual. Such occurrences historically mark turning points in the financial markets, Shinbein said.
“My feeling is that stocks are coming out of an oversold condition and commodities are moving into an overbought condition,” he said. Such a scenario would call eventually for a sharp drop in commodities prices.
Analysts could cite no single reason behind Tuesday’s sharp gains but the buying surges appeared to hit the markets in domino fashion, beginning with grains and soybeans.
Soybean futures opened and closed up the 30-cents-a-bushel limit allowed for daily trading on the Chicago Board of Trade in response to the Midwest’s hot, dry weekend and predictions for more of the same.
“Weather’s the story, that’s the whole ball game,” said Victor Lespinasse, a trader with the investment firm Dean Witter Reynolds Inc. in New York.
The Agriculture Department reported soybean planting was about 74% finished as of Sunday. Traders fear a drier-than-normal summer could lead to tight supplies next year, analysts said.
Wheat, corn and oat crops also would suffer during a summer of little rain, but the rapid depletion of soybean stockpiles has made that market particularly sensitive to growing conditions.
Tuesday’s gains brought the near-month soybean contract, for delivery in July, to within easy striking range of $8 a bushel for the first time since the spring of 1984.
Eight of the nine soybean contracts finished limit up, as did the contracts for September and December delivery of oats and March delivery of corn, both of which carry a 10-cents-a-bushel limit.
Wheat settled 9.50 cents to 15.50 cents higher with the contract for delivery in July at $3.5150 a bushel; corn was 7.75 cents to 10 cents higher with July at $2.2425 a bushel; oats were 9.75 cents to 10 cents higher with July at $1.8250 a bushel, and soybeans were 18.50 cents to 30 cents higher with July at $7.98 a bushel.
The soaring grain markets supported livestock and meat futures on the Chicago Mercantile Exchange, said Philip Stanley, an analyst in Chicago with Thomson McKinnon Securities Inc.
Unseasonably warm weather lent additional support to the pork bellies, which are sliced to make bacon and often end up in summertime bacon-lettuce-and-tomato sandwiches, Stanley said.
“The BLT season is probably what’s got everybody pumped up about the bellies,” he said.
Live cattle settled 0.23 cent to 0.72 cent higher, with the contract for delivery in June at 72.15 cents a pound; feeder cattle were 0.08 cent to 0.43 cent higher, with August at 76.35 cents a pound; hogs settled 0.40 cent to the limit 1.50 cents higher, with June at 54.77 cents a pound, and frozen pork bellies were up the 2-cents-a-pound limit across the board, with July at 56.32 cents a pound.
The higher agricultural commodity prices--often perceived as an inflationary signal--prompted hedge-type buying of gold and silver futures on New York’s Commodity Exchange and heavy buying of platinum on the New York Mercantile Exchange, analysts said.
The dollar’s relative weakness against foreign currencies has made platinum particularly attractive to Japanese and European investors, said Richard Maseri, senior trader for JCC Inc., a Miami-based commodities brokerage.
Platinum settled $25 to $33.70 higher, with July at $610.90 an ounce. Gold was $3.50 to $4.20 higher, with June at $455 an ounce; silver was 7 cents to 10 cents higher, with June at $6.60 an ounce.
Stock index futures jumped sharply on the Chicago Mercantile Exchange, where the contract for June delivery of the Standard & Poor’s 500 index settled 9.45 points higher at 262.95.
Oil prices rose in light trading on the New York Mercantile Exchange but dealers were reluctant to take new positions in advance of OPEC’s June 8 meeting in Vienna, analysts said.
West Texas Intermediate crude oil settled 5 cents lower to 8 cents higher, with July at $17.51 a barrel; heating oil was 0.06 cent to 0.45 cent higher, with June at 48.23 cents a gallon, and unleaded gasoline was 0.04 cent to 0.40 cent higher, with June at 52.95 cents a gallon.
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