COMMODITIES : Rain Brings Sharp Drop in Corn, Soybean Prices

Rainy weather brought another sharp drop in corn and soybean futures prices Tuesday on the Chicago Board of Trade.

While some analysts wondered if the Midwestern drought had finally been quenched, meteorologists would say only that more rain is expected, particularly over the Ohio River Valley, during the next week at least. Equally heartening are cooler temperatures accompanying the increased moisture, said Dan Bowman, a meteorologist with WeatherData, a private forecasting concern in Kansas City, Mo.

On other markets, silver futures soared to a 10-month high, livestock and meat were mostly lower and stock index futures retreated.

The key to ending the drought, Bowman said, lies in the westward movement of a low-pressure area off Canada’s eastern coast, which will push the jet stream south into the Midwest, bringing more moisture and cooler air.

Meanwhile, the persistent high-pressure area that had perched for weeks over the Midwest has moved to the Pacific Coast, he added.

The wet weather pattern that drenched parts of the upper Midwest over the weekend brought rain on Tuesday to the region’s parched southern and western portions. More rain is expected today in the northern Corn Belt.

Weather Setting Course

Analysts said the rain halted further deterioration of the badly damaged corn crop and greatly improved the yield prospects for soybeans, which are just entering the critical pod-forming stage.

Some corn and soybean contracts plummeted their permissible limits, and analysts said that after two consecutive days of limit losses, the markets appeared to have discounted all the rain in sight for the Corn Belt.

“I think we’ll have a two-sided trade tomorrow,” said Victor Lespinasse, a trader with Dean Witter Reynolds Inc. in Chicago.

Lespinasse said the weather would continue to set the market’s course, and Cathy Leow, an assistant vice president with Thomson McKinnon Securities Inc. in New York, agreed.

“Last week a lot of people bought soybeans at $9 thinking they were going to go to $13,” she said. “Now they’re thinking, ‘My god, what if we continue to get rain?’ ”

Although it was uncertain how much rain the western Corn Belt would receive overnight, Leow said the price drop of the past two days probably had taken a substantial rainfall into account.

Oat futures also finished lower, but wheat futures advanced on expectations of new export business, analysts said.

Wheat settled 6 cents to 8.5 cents higher, with the contract for delivery in July at $3.76 a bushel; corn was the limit 15 cents lower to 5 cents higher, with July at $3.085 a bushel; oats were 14 cents lower to 3 cents higher, with July at $2.90 a bushel, and soybeans were 6 cents to the limit 45 cents lower, with July at $8.745 a bushel.

Silver Miners Strike

The price for July delivery of silver soared more than 57 cents on New York’s Commodity Exchange to $7.727 an ounce, the highest price for near-month delivery since Sept. 10, when the September contract closed at $8.

Analysts cited a number of factors for the rise, including the 2-day-old Peruvian silver miners strike and growing demand for silver as a hedge against inflation.

World supplies of silver are plentiful, and the strike in Peru, which accounts for about 20% of world production, normally would have little long-term effect on prices, said Fred Demler, analyst with Drexel Burnham Lambert.

“If investment demand were not picking up, the fact that the supply is being disrupted from Peru would not have a large impact” on the supply-demand scenario, he said.

Gold settled $8.70 to $9.80 higher, with August at $447.50 an ounce; silver was 57.7 cents to 62.5 cents higher, with July at $7.727.

The contract for September delivery of the Standard & Poor’s 500 stock index settled 1.85 points lower at 270.45 on the Chicago Mercantile Exchange.

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