COMMODITIES : Corn Futures Rise Limit on Drought Fears

Drought fears drove corn futures prices up their daily limit for the sixth consecutive day Tuesday on the Chicago Board of Trade. Soybean futures also rose sharply while wheat futures retreated.

On other markets, livestock and meat futures were mostly higher; copper futures surged while precious metals were nearly unchanged; energy futures gained; and stock index futures advanced.

The National Weather Service’s latest six-to-10 day forecast for hot, dry weather in the Midwest through the end of the month threatened further damage to corn, oat and soybean crops and inspired new buying of futures contracts, analysts said.

“With the corn crop, each week that goes by without rain means another 10% is lost,” said Joel Karlin, an analyst with Research Department Inc. in Chicago. Some experts estimate anywhere from 10% to 30% of the U.S. corn crop has already been ruined by lack of rain.

Still, the Agriculture Department’s weekly weather and crop bulletin rated most U.S. corn in fair condition and most of the soybean crop in fair or good condition as of Sunday.

Wheat Prices Decline

Karlin said the soybean crop could hold out a little longer than corn, but “you’re rapidly running out of this grace period before rains are desperately needed. I think it’ll be around the July 4th weekend before yield losses occur.”

Wheat futures prices dropped on profit taking linked to the ongoing winter wheat harvest, which is about 23% complete, according to USDA figures.

Karlin said the wheat market also was pressured by recurring rumors that the USDA plans to curtail its export subsidy program if the drought continues. The agency has repeatedly denied any such plans.

Skyrocketing soybean prices triggered an increase in the Board of Trade’s daily price limit on soybean futures from 30 cents to 45 cents a bushel for three days beginning Tuesday. Limits on oats, soybean meal and soybean oil will be temporarily expanded by 150% beginning Wednesday.

Limits on corn futures dropped back to 10 cents a bushel Tuesday after three days at 15 cents.

Wheat settled 4 cents to 12 cents lower, with the contract for delivery in July at $3.89 1/2 a bushel; corn was 2 cents to 10 cents higher, with July at $3.34 1/2 a bushel; oats were 9 cents to 10 cents higher, with July at $3.18 a bushel; soybeans were 6 cents lower to 45 cents higher, with July at $10.46 1/2 a bushel.

The mixed performance of live-cattle and hog futures indicated “drought spreading” by traders on the Chicago Mercantile Exchange, analysts said.

Pork Belly Futures Up

The strategy--which involves selling contracts for summer delivery while buying those for fall and winter delivery--is based on expectations of increasing slaughters this summer as drought-stressed producers thin their herds, followed by declining supplies of animals next year.

Pork belly futures finished sharply higher, with some contracts up the 2-cent-a-pound limit--in a reversal of recent sharp losses.

Live cattle settled 0.37 cent lower to 0.57 cent higher, with August at 63.90 cents a pound; feeder cattle were 0.70 cent to 1.12 cents higher, with August at 71 cents a pound; hogs were 0.30 cent lower to 1.32 cents higher, with July at 46.25 cents a pound; frozen pork bellies were 1.18 cents to 2 cents higher, with July at 43.15 cents a pound.

Precious Metals Gain

Copper futures surged as much as 5.9 cents a pound on New York’s Commodity Exchange on indications of tight near-term supplies and growing demand, analysts said.

Industrial metals are enjoying strong demand due to the economic expansion of the United States and other countries, analysts said.

Copper settled 1.30 cents to 5.90 cents higher, with the active July contract at $1.0835 a pound.

Precious metals prices edged higher on the Comex. Gold was 90 cents to $1.10 higher, with August at $455.40 an ounce; silver was unchanged to 1.2 cents higher, with July at $7.195 an ounce.

Most energy futures gained slightly on the New York Mercantile Exchange.

West Texas Intermediate crude oil settled 11 cents lower to 11 cents higher, with July at $15.89 a barrel; heating oil was 0.10 cent to 0.20 cent higher, with July at 43.28 cents a gallon; unleaded gasoline was 0.16 cent to 0.52 cent higher, with July at 49.99 cents a gallon.

Stock index futures moved higher on the Chicago Mercantile Exchange, where the contract for September delivery of the Standard & Poor’s 500 index advanced 3.9 points to 275.40.

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