COMMODITIES : Rain Forecast Sends Grain Prices Plunging

A forecast for rain and possible relief for drought-stricken crops brought corn and soybean futures prices down their daily limits Tuesday in a wild turnaround at the Chicago Board of Trade.

A day earlier, prices were limit-up as corn and bean traders anticipated a continuation of the drought and further crop deterioration. A forecast calling for showers to move into the Midwest late Tuesday and today made buyers nervous and sparked a massive selloff, and other markets dipped in sympathy.

In other markets, cattle and hog futures prices were mixed at the Chicago Mercantile Exchange, cotton prices fell at the New York Cotton Exchange, crude oil and heating oil declined at the New York Mercantile Exchange, gold and silver prices dipped at the New York Commodity Exchange and sugar prices rallied at the New York Coffee, Sugar & Cocoa Exchange.

“That dirty word was being heard on the floor today, r-a-i-n. Not a lot, just a little bit, but that’s all it takes to scare anybody,” said Victor Lespinasse, an analyst with Dean Witter Reynolds Inc.

Turning Point

Corn prices closed down the daily limit--expanded Tuesday to 15 cents a bushel--in all but two months. News that the government released 1.3 billion bushels of corn that had been held off the market in government storage added to the price drop.

Soybeans, meanwhile, fell the expanded 45-cents-a-bushel limit in all months except November, 1989.

“We’re at a turning point here,” Lespinasse said, as nobody knows the impact rains forecast for the next few days over much of the Midwest will have on thirsty crops.

“Everybody’s scared to death because of that dirty word,” he said.

Wheat prices settled 0.23 cent to 0.2750 cent lower, with the contract for delivery in July at $3.7325 a bushel; corn settled 0.0225 cent to 0.15 cent lower, with July at $3.3750 a bushel; oats settled 0.15 cent lower across the board, and soybeans settled 0.2575 cent lower to 0.45 cent lower, with July at $10.1450 a bushel.

The sharp drop in the corn and soybean markets added a negative tone to trading in cattle and hog futures at the Chicago Mercantile Exchange, analysts said.

“All of a sudden with the corn and soybeans limit down, that gave a signal to those people who had been maintaining the drought-type spread to kind of cash in,” said Chuck Levitt, an analyst in Chicago with Shearson Lehman Hutton.

But losses were tempered by a USDA announcement after the close of trading “that they intended to expand beef purchases under the food assistance programs by $50 million,” Levitt said.

The result will be “that ranchers who are liquidating cows on the market will find a little better price than what they’ve been experiencing of late,” he said.

Cotton Prices Down

Hog prices were pressured by a fresh round of price decreases on the wholesale pork market “when a stronger market was anticipated,” Levitt said.

Cattle prices settled 0.55 cent lower to 0.55 cent higher, with the contract for delivery in August at 64.62 cents a pound; feeder cattle were unchanged to 1.50 cents higher, with August at 73.05 cents a pound; live hogs were 0.85 cent lower to 0.22 cent higher, with July at 45.57 cents a pound, and frozen pork bellies were 1.27 cents lower to 1.65 cents higher, with July at 37.85 cents a pound.

Cotton prices followed the lead of grains and soybeans, falling the daily 2-cents-a-pound limit on concerns of crop-enhancing rains, after surging up the limit Monday.

Cotton settled 1.25 cents lower to 2.38 cents lower for the July contract, which has no limit. The July contract was 66.42 cents a pound.

Precious metals also felt pressure from the selling wave in corn and beans, said Jack Barbanel, an analyst with Gruntal & Co. in New York.

“When the agriculturals could not sustain a rally . . . there were quite substantial selloffs” in gold and silver, he said.

Gold prices settled $5.40 to $5.60 lower, with the June contract at $437.50 an ounce.

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