COMMODITIES : Rain Forecast Cools Rally in Corn, Soybeans

Prospects of a second night of rain in the central Corn Belt limited rallies in corn and soybean futures prices Tuesday, despite an influential private report indicating severe drought damage to the crops.

Wheat futures also gained slightly on the Chicago Board of Trade while oat futures closed lower.

On other markets, coffee futures rose sharply, livestock and meat prices were mixed, energy futures were lower and stock index futures retreated.

A report from the respected Chicago-based crop analyst Conrad Leslie generated buying interest in crop futures.

Leslie estimated 1988 U.S. soybean production at 1.48 billion bushels, down 23% from last year’s actual production of 1.91 billion bushels, and corn production at 4.28 billion bushels, a 39% drop from the 7.06 billion bushels harvested last year.

“This means the worst drought of the century is producing the smallest U.S. corn crop since 1970,” Leslie said in his report.

Leslie also reported signs of spider mite damage to soybean plants in Illinois and Iowa. Even if such plants received rain, he said, “they may only stabilize rather than improve their yields.”

Leslie’s numbers fell near the low end of other private estimates issued recently in advance of the Agriculture Department’s official report on Thursday. In its July crop report, the USDA pegged 1988 soybean production at 1.65 billion bushels and corn production at 5.2 billion bushels.

Rally Kept in Check

The USDA’s weekly crop update, showing a decline in crop conditions last week, provided further support to the grain futures, said Mario Balletto, soybean analyst with Merrill Lynch Capital Markets in New York.

But he said forecasts for more rain in the central Midwest kept the rally in check.

Wheat settled unchanged to 3 cents higher, with the contract for delivery in September at $3.7925 bushel; corn was 1 cent to 4.25 cents higher, with September at $2.99 a bushel; oats were 1 cent to 5.5 cents lower, with September at $2.68 a bushel, and soybeans were 3.5 cents to 20 cents higher, with August at $8.5575 a bushel.

Coffee futures prices surged in light trading on New York’s Coffee, Sugar & Cocoa Exchange but analysts said the rally was technical in nature and not related to any new developments within the International Coffee Organization.

Light buying by coffee roasters nudged prices past a key technical point, which triggered a broader rally, said Sandra Kaul, coffee analyst in New York with Shearson, Lehman Hutton Inc.

Coffee for September delivery settled 3.81 cents higher at $1.1834 a pound.

Oil Futures Slump

Cattle futures finished mixed on the Chicago Mercantile Exchange amid conflicting views about future beef demand and cash prices, analysts said. Pork futures retreated on weakening cash prices.

Live cattle settled 0.28 cent lower to 0.38 cent higher, with August at 68.25 cents a pound; feeder cattle were 0.10 cent lower to 0.53 cent higher, with August at 79.90 cents a pound; hogs were 0.15 cent to 1.30 cents lower, with August at 45.45 cents a pound, and frozen pork bellies were 0.15 cent to 0.45 cent lower, with August at 32.80 cents a pound.

Oil prices weakened in quiet trading on the New York Mercantile Exchange. Analysts said the slump was a reaction to Monday’s sharp run-up.

West Texas Intermediate crude oil settled 19 cents to 30 cents lower, with September at $15.68 a barrel; heating oil was 0.43 cent to 0.53 cent lower, with September at 44.07 cents a gallon, and unleaded gasoline was 0.35 cent to 0.61 cent lower, with September at 46.15 cents a pound.

Stock index futures retreated on the Chicago Mercantile Exchange, where the contract for September delivery of the Standard & Poor’s 500 index settled 2.40 points lower at 267.40.

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