COMMODITIES : Weather Jitters Send Wheat Futures Up

Wheat futures prices bounded higher Thursday amid increasing fears that disease and drought could significantly reduce yields from the rapidly maturing winter wheat crop.

Other grain futures also moved higher on the Chicago Board of Trade and soybean futures finished mixed.

On other markets, cattle futures were sharply lower while pork futures were mixed; precious metals were mixed; energy futures and stock index futures advanced.

With the winter wheat crop in need of a good soaking to finish off the maturation process before harvest, wheat traders were worried that a continuation of the recent dry weather could do enough damage to cut yields, analysts said.

Weekend weather forecasts were mixed and the National Weather Service called for normal to below-normal rainfall across the country for the first half of next week.

In addition to weather problems, reports have surfaced of disease damage to wheat in Kansas and Nebraska, said Walter Spilka, an analyst in New York with Smith Barney, Harris Upham & Co.

Although most of the wheat crop has been reported in good condition, concerns about potential damage have become strong enough that “the wheat market is beginning to take on a life of its own” instead of following the corn and soybean trends, Spilka said.

Indeed, corn and soybean prices also ran up sharply early in the day but retreated on profit taking after grain contracts for May delivery expired at noon. Wheat prices remained firm right through the close.

Broad Price Advance

“The wheat is in the heading stage, when it normally does need a good rain to finish off the crop and ensure good yields,” Spilka said. “So the wheat may be trading on some dryness of its own.”

Wheat settled 8.50 cents to 11.25 cents higher, with the contract for delivery in July at $3.4225 a bushel; corn was 1.50 cents to 3 cents higher, with July at $2.16 a bushel; oats were 2.75 cents to 3.50 cents higher, with July at $1.7225 a bushel, and soybeans were 2.25 cents lower to 1.7575 cents higher, with July at $7.68 a bushel.

The early run-up in grain prices had a strong negative impact on cattle futures on the Chicago Mercantile Exchange.

Higher grain prices would mean higher feed prices and narrower profit margins for cattle producers, which could ultimately lead to higher beef prices and a corresponding drop in demand for beef, analysts said.

“The threat of higher feed costs in the future and the potential for tighter supplies of feed grains . . . certainly threw some indecision into the live cattle futures,” said Dale Durchholz, market analyst for AgriVisor Services Inc. in Bloomington, Ill.

In addition, hot weather is drying up the Western ranges, which could force early sales of cattle to feedlots and boost supplies of market-ready animals, Durchholz said.

The weakness in the cattle futures carried over into the neighboring pork pits but expectations of a seasonal drop in hog supplies limited losses and helped hog futures close on a mixed note, he said.

Gold Closes Mixed

Live cattle were 0.20 cent to 0.87 cent lower, with June at 73.12 cents a pound; feeder cattle were 0.62 cent to 1.23 cents lower, with May at 80.65 cents a pound; hogs were 0.17 cent lower to 0.42 cent higher, with June at 53.67 cents a pound, and frozen pork bellies were 0.20 cent to 0.80 cent lower, with May at 53.05 cents a pound.

The precious metals markets also were watching grain prices, especially soybean prices, which are considered a rough indicator of inflation, analysts said.

Gold futures on New York’s Commodity Exchange hit their highs early in the day, then sold off as soybean prices fell, said Peter Cardillo, an analyst in New York with Josephthal & Co.

The profit taking was more pronounced in the silver market, where futures prices settled sharply lower following a strong rally on Wednesday.

Gold settled 20 cents lower to 10 cents higher, with June at $458.20 an ounce; silver was 7.3 cents to 7.5 cents lower, with May at $6.612 an ounce.

Energy futures edged higher in dull trading on the New York Mercantile Exchange.

West Texas Intermediate crude oil settled 2 cents to 34 cents higher, with June at $17.45 a barrel; heating oil was 0.08 cent lower to 0.56 cent higher, with June at 47.63 cents a gallon, and unleaded gasoline was 0.07 cent to 0.25 cent higher, with June at 52.30 cents a gallon.

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