COMMODITIES : Drought Again Pushes Grain, Bean Prices Higher
Grain and soybean futures prices spurted sharply higher Monday in another drought-driven session on the Chicago Board of Trade.
On other markets, livestock and meat futures were mixed, oil futures fell, precious metals were lower and stock index futures retreated.
In another signal of rising prices, the Commodity Research Bureau’s index of 21 industrial and agricultural commodities rose 2.93 points to a four-year high of 266.23.
Except for wheat, all grain and soybean futures on the Chicago Board of Trade shot up their daily allowable limits at the opening bell and didn’t budge all day.
Whenever a futures contract’s price moves its daily limit, trading ceases in that contract. The limit-up opening left only wheat futures open for trading, which in turn left most traders “bored,” said Victor Lespinasse, a trader with Dean Witter Reynolds Inc.
“I sat around and talked to people. I didn’t do very much,” he said.
Wheat futures were influenced less by the drought than corn, oats and soybeans because the winter wheat crop, which accounts for 75% of U.S. production, is nearly finished growing and is being harvested.
Lespinasse said some private meteorologists had predicted light rain for some parts of Illinois, Indiana and Ohio on Wednesday and Thursday.
“But that’s not for certain, of course, and judging by the way the market reacted, it’s going to stay hot and dry,” he said. “And as long as it’s hot and dry, we’ll keep going higher.”
After the close, the National Weather Service issued a 6-to-10-day forecast predicting above-normal temperatures and below-normal rainfall for the Grain Belt in the first five days of next week.
Daily Limit Reduced
The near-month soybean contract, for July delivery, settled above $10 a bushel, an 11-year high. Soybeans reached an all-time high of $12.90 a bushel in June, 1973.
Wheat futures are at their highest level in nearly seven years. Corn futures prices are at four-year highs.
The Board of Trade said the daily limit on corn futures would return to 10 cents a bushel today. The limit was raised to 15 cents for three days, ending Monday, after all three corn contracts for 1988 delivery finished up the limit on two consecutive days.
Wheat settled 10 cents to 19.75 cents higher, with the contract for delivery in July at $4.0125 a bushel; corn was 15 cents higher across the board, with July at $3.245 a bushel; oats were 10 cents higher across the board, with July at $3.08 a bushel, and soybeans were 30 cents higher across the board, with July at $10.015 a bushel.
On the Chicago Mercantile Exchange, traders used the phrase “a drought spread” to describe Monday’s pattern of widely mixed prices for future delivery of livestock and meat.
Most prices for summer and fall delivery moved lower in anticipation of increased supplies as higher feed prices and shrinking pasture land caused widespread slaughtering of animals, analysts said.
But prices for delivery in the winter and spring soared, some by their permissible limits, on expectations that over the long term the drought-related herd liquidation will result in a sharp drop in supplies, said Thomas Morgan, president of Sterling Research Corp. in Arlington Heights, Ill.
Oil Futures Drop
Live cattle were 0.25 cents lower to 1.50 cents higher, with June at 70.60 cents a pound; feeder cattle were 1.50 cents lower to 1.22 cents higher, with August at 70.30 cents a pound; hogs were 1.27 cents lower to 1.50 cents higher, with June at 50.45 cents a pound, and frozen pork bellies were 1.13 cents lower to 2 cents higher, with July at 41.97 cents a pound.
Crude oil for near-month delivery on the New York Mercantile Exchange fell to $16 a barrel for the first time since March 16 because of an abundance of available crude oil, said John Azarow, an analyst at Shearson Lehman Hutton Inc. in New York.
West Texas Intermediate crude oil settled 45 cents lower to 6 cents higher, with July at $16 a barrel; heating oil was 0.25 cent to 0.55 cent lower, with July at 43.18 cents a gallon, and unleaded gasoline was 0.50 cent lower to 0.04 cent higher, with July at 49.47 cents a gallon.
Gold and silver futures slipped on the Commodity Exchange in New York in reaction to the drop in oil prices and the strength of the dollar, analysts said.
Gold settled $3.80 lower across the board, with August at $454.50 an ounce; silver was 5.5 cents to 6 cents lower, with July at $7.195 an ounce.
Stock index futures dipped on the Chicago Mercantile Exchange, where the contract for September delivery of the Standard & Poor’s 500 index settled 1.25 points lower at 271.50.
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