COMMODITIES : Grain, Soybean Futures Fall Their Limits
Most grain and soybean futures prices plummeted their limits for daily trading Thursday on the Chicago Board of Trade, taking some analysts by surprise and leaving them divided on the reasons for the move.
On other markets, livestock and meat were mixed, precious metals advanced and stock index futures gained.
“I’m astounded,” Katharina Zimmer, New York-based grains analyst for Merrill Lynch Capital Markets, said after the grain and soybean markets closed.
Most corn, soybean and oat contracts plunged their respective 15-, 30- and 10-cent limits for daily trading, and the limitless contracts for July delivery fell even further. Wheat contracts for December, March and July, 1989, delivery tumbled 20 cents a bushel, the limit in that market.
Despite new forecasts for weekend rains in the dry and dusty Midwest, the selloff was technically inspired, Zimmer said.
“This market has nothing to do with fundamentals any more,” she said. Instead, she said, Thursday’s action was dominated by technicians, who base their trading decisions on historical chart patterns.
On Thursday, the charts indicated that it was time to sell, Zimmer said.
More likely, the drop was caused by a combination of technical and fundamental factors, said Ted Mao, grain specialist with Shearson Lehman Hutton in New York.
Rain Forecast
Although prices turned lower shortly after the opening, Mao said the sharpest drop followed midday news reports that Senate Minority Leader Bob Dole, (R-Kan.), had said the Senate may consider measures allowing farmers to plant soybeans and oats on a portion of their acreage idled under government crop programs.
But Dole, speaking to the Commodity Club in Washington, said the Senate probably would not act on the matter for at least another month.
Private forecasts for moderate rainfall this weekend in the northern Corn Belt also pressured the markets, Mao said.
“The market continues to show its sensitivity to prospects of getting even a little bit of rain,” he said.
“That’s nonsense,” countered Zimmer, who dismissed the expected rain as “sprinkles.”
“To tell an Illinois farmer we’re locked limit-down because of the rain we’re going to get, I don’t know what they’d say, but it probably would not be printable,” she said.
Wheat settled 15.5 cents to 20 cents lower, with the contract for delivery in July at $3.78 a bushel; corn was 14.5 cents to 22 cents lower, with July at $3.20 a bushel; oats were 10 cents to 22 cents lower, with July at $3.01 a bushel, and soybeans were 26 cents to 49.5 cents lower, with July at $9.345 a bushel.
The inflationary implications of higher energy prices supported precious metals futures on New York’s Commodity Exchange, analysts said.
Livestock Mixed
Gold settled 40 cents to $1.20 higher, with August at $441.10 an ounce; silver was 11.5 cents to 13.6 cents higher with July at $6.935 an ounce.
Livestock and meat futures finished mixed on the Chicago Mercantile Exchange.
The drop in grain prices prompted reversals of recent drought-related trends in the cattle and hog markets, and pork bellies rebounded sharply after touching eight-year lows on Wednesday, said Paul Hare, an analyst with Linnco Futures in Chicago.
Live cattle were 0.60 cent lower to 0.15 cent higher, with August at 64.75 cents a pound; feeder cattle were 0.05 cent to 0.38 cent higher, with August at 74.75 cents a pound; hogs were 1.50 cents lower to 0.83 cent higher, with July at 45.40 cents a pound; frozen pork bellies were 0.70 cent lower to 2 cents higher, with July at 34.40 cents a pound.
Stock index futures finished higher on the Chicago Mercantile Exchange, where the contract for September delivery of the Standard & Poor’s index settled 1.20 points higher at 273.20.
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