COMMODITIES : Corn Futures Soar Limit on Drought Fears

Corn futures prices soared the maximum allowed for daily trading Tuesday on the Chicago Board of Trade as long-range weather forecasts fanned fears of drought damage to the U.S. corn crop. Other grain and soybean futures also advanced.

On other markets, energy futures posted steep gains, Treasury bond futures and stock index futures rose sharply, livestock and meat were lower, copper plunged and precious metals rose.

The National Weather Service’s forecast for warmer- and drier-than-normal conditions in the Midwest through mid-July was the main factor driving corn prices higher, analysts said.

Until this week, the dramatic rise in corn futures prices was mainly speculative because a soaking rain could have restored almost all of the crop to full health.

But the lack of moisture has now begun taking a real toll on the corn crop, despite scattered showers Tuesday in parts of Minnesota, Iowa and Wisconsin, said Katharina Zimmer, a wheat and corn analyst with Merrill Lynch Capital Markets Inc. in New York.

“Everybody knows that this is the week when we start doing damage to the corn crops in many important growing areas,” she said. “This is the week when we really start taking off bushels.”

Oats, Spring Wheat Damaged

Contracts for delivery of corn in July, September, December and March all advanced their daily limit of 10 cents a bushel.

The oat and spring wheat crops have already sustained severe drought damage, and experts say the soybean crop will suffer if the dry spell continues into July.

Wheat settled 1.50 cents to 6 cents higher, with the contract for delivery in July at $3.74 a bushel; corn was 3.50 cents to 10 cents higher, with July at $2.695 a bushel; oats were 2 cents lower to 7.25 cents higher, with July at $2.6925 a bushel, and soybeans were unchanged to 14.50 cents higher, with July at $8.90 a bushel.

Oil futures surged following reports that Organization of Petroleum Exporting Countries ministers had agreed to extend their existing oil output pact for six months, but some analysts were at a loss to explain the market’s reaction.

Futures prices had fallen sharply during the past week in anticipation of just such an agreement. Peter Beutel, an analyst in New York with Elders Futures Inc., said he didn’t know whether the jump in prices signaled a major turnaround in market sentiment or was merely an upward blip in a downward trend.

“I feel a little like a detective who knows there’s a dead body here and who’s looking for a murder weapon and a motive,” he said.

Trade Report Boosts Bonds

West Texas Intermediate crude oil settled 38 cents to 42 cents higher, with July at $16.83 cents a barrel; heating oil was 0.55 cent to 0.59 cent higher, with July at 44.32 cents a gallon, and unleaded gasoline was 0.88 cent to 1.13 cents higher, with July at 49.53 cents a gallon.

The government’s report of an unexpected narrowing of the U.S. trade deficit to $9.89 billion gave Treasury bond futures a boost on the Chicago Board of Trade.

The dollar’s stronger showing against other major currencies also supported Treasury bond futures, analysts said.

June Treasury bonds settled 1 29/32 higher at 90 16/32.

Stock index futures markets also registered optimism in the wake of the trade deficit report. The contract for June delivery of the Standard & Poor’s 500 index on the Chicago Mercantile Exchange settled 2.90 points higher at 274.60.

Pork futures retreated on the Chicago Mercantile Exchange--with frozen pork bellies down sharply for the sixth straight day--on slack retail demand for pork products, low cash hog prices and concerns about abundant supplies of pork bellies in cold storage, analysts said.

Copper Futures Fall

Live cattle futures were mostly lower on weak cash markets. A sharper drop in feeder cattle futures prices reflected concern about the rising cost of feed grains, said Thomas Morgan, president of Sterling Research Corp. of Arlington Heights, Ill.

Live cattle settled 0.27 cent lower to 0.20 cent higher, with June at 71.80 cents a pound; feeder cattle were 0.65 cent to 1 cent lower, with August at 73.27 cents a pound; hogs were 1.05 cents lower to 0.43 cent higher, with June at 50.65 cents a pound, and frozen pork bellies were 1 cent to 1.88 cents lower, with July at 46.47 cents a pound.

Copper futures prices fell steeply on the Commodity Exchange in New York, reflecting improved availability of the metal, analysts said. Copper for June delivery settled 3.65 cents lower at $1.085 a pound.

Gold and silver futures posted slight gains in reaction to higher grain and energy futures prices.

Gold settled 20 cents to $1 higher, with August at $454.60 an ounce; silver was 0.6 cent to 1.5 cents higher, with July at $7.07 an ounce.

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