COMMODITIES : Grain Futures Higher in Cautious Trading

Prices of grain and soybean futures moved moderately higher Tuesday on the Chicago Board of Trade in cautious dealings before the Agriculture Department’s eagerly awaited monthly crop report.

Analysts said the report, released after trading ended and forecasting a 24% decline in overall U.S. grain production, should send prices higher when trading resumes today.

But they added that weather forecasts will continue to dominate the markets.

On other markets, livestock and meat futures were mixed, energy futures were mixed, precious metals were higher and stock index futures retreated.

Grain analysts called the crop report bullish for soybean prices, bearish for corn and slightly bearish for wheat. But the anticipated strength in soybeans was expected to offset the weakness in the grains, ultimately pulling all the grain markets higher today--at least for a few minutes.

“After about three minutes of trading, they’ll have worked off their report anxiety and we’ll be looking at Friday’s, Saturday’s and Sunday’s weather, which we see as hot, hot, hot,” said Walter Spilka, a grain analyst in New York with Smith Barney, Harris Upham & Co.

“I don’t think the market’s going to dwell on this report too long,” agreed Joel Karlin, chief research analyst with Research Department Inc. in Chicago.

Based on conditions as of Tuesday, the USDA predicted a 27% drop in corn production from 1987, a 14% drop in soybean production and a wheat crop 13% smaller than that harvested last year.

Confirms Crop Damage

The corn harvest was estimated at 5.2 billion bushels, compared to the June estimate of 7.3 billion and year-ago production of 7.06 billion.

The USDA estimated 1988 soybean production at 1.65 billion bushels, compared to a June estimate of 1.88 billion and 1987 production of 1.9 billion bushels.

Production of all U.S. wheat was projected at 1.84 billion bushels, compared to the June estimate of 2.12 billion and 1987 production of 2.1 billion.

Analysts called the corn and wheat estimates conservative.

“This just confirms everybody’s opinion that there’s some crop damage out there, and the USDA is looking at a bit more of a problem in soybeans than the trade had anticipated,” Spilka said.

This year’s planted soybean acreage, estimated by the USDA at 58.52 million acres, was about 700,000 acres below market expectations. Planted corn acreage, estimated at 67.52 million acres, was about 500,000 acres more than expected.

Grain and soybean futures advanced moderately before the report, which was issued after the markets closed.

Wheat settled 8.75 cents to 13.25 cents higher, with the contract for delivery in July at $3.8125 a bushel; corn was 8.25 cents to 17.75 cents higher, with July at $3.06 a bushel; oats were 1.50 cents lower to 15 cents higher, with July at $2.79 a bushel, and soybeans were 7 cents to 21.5 cents higher, with July at $8.795 a bushel.

Cattle futures finished mixed while some pork futures advanced their daily limits on the Chicago Mercantile Exchange in reaction to the rise in feed grain prices, said Dale Durchholz, a pork market analyst with AgriVisor Services Inc. in Bloomington, Ill.

Metals Futures Gain

Traders expect livestock and meat prices to rise sharply next year after falling in the near term due to widespread producer selling of animals this summer because of the drought-driven rise in feed prices, he said.

The USDA also reported the worst July 1 pasture conditions in history, which should encourage further drought-pattern trading on the livestock markets, said Thomas Morgan, president of Sterling Analytical Services Inc. in Arlington Heights, Ill.

Live cattle settled 0.70 cent lower to 0.17 cent higher, with August at 65.82 cents a pound; feeder cattle were 0.20 cent to 0.60 cent lower, with August at 75.72 cents a pound; hogs were 0.20 cent to the limit 1.50 cents higher, with July at 45.67 cents a pound, and frozen pork bellies were 0.40 cent to the limit 2 cents higher, with July at 33.10 cents a pound.

Precious metals futures posted modest gains on New York’s Commodity Exchange because of the inflationary implications of higher grain prices and a weaker dollar.

Gold settled $2 to $2.30 higher with August at $438.70 an ounce; silver was 3.7 cents to 3.8 cents higher with July at $6.974 an ounce.

Tables, Page 10