COMMODITIES : Drought Forecasts Drive Corn, Oat and Soybean Prices Up the Limit

Forecasts for another month of drought in the Midwest drove prices for some corn, oat and soybean futures up their allowable limits Thursday, but late profit taking tempered the advance. Wheat finished lower.

On other markets, sugar futures rallied to a seven-year high; silver posted sharp gains; lumber futures plunged; livestock and meat were mostly higher; energy futures rose, and stock index futures advanced.

On the Chicago Board of Trade, all corn, oat and soybean contracts skyrocketed their respective limits at the opening in response to the National Weather Service’s 6- to 10-day and 30-day forecasts for continued hot, dry conditions in the Farm Belt.

Contracts for delivery this summer through next spring held those limit gains through the close. But prices for later delivery weakened late in the session, and the July contracts, on which limits have been removed pending next Wednesday’s expiration, posted only modest gains.

Analysts said the pattern indicated profit taking, perhaps stemming from increased--but still slight--chances of rain in the Midwest today.

“Even in a wildly bullish market, you don’t go limit-up every day,” said Victor Lespinasse, a trader with Dean Witter Reynolds Inc.

Mario Balletto, soybean analyst with Merrill Lynch Capital Markets Inc., said the slight increases in July prices would allow other contracts to catch up. Prices for July deliveries of corn and soybeans had surged far ahead of other delivery months on Wednesday.

“On a day like today, things start evening out a little,” Balletto said.

Wheat futures finished lower in a technical move after failing to hold new contract highs.

Despite the market’s mixed performance, grain and soybean prices remain tied to the weather, analysts agreed.

Rain is badly needed to salvage the shrinking percentage of the corn crop that has not already been irreparably damaged by the drought, and to prevent substantial soybean losses as that crop enters its flowering and pod-forming stage, Balletto said.

Wheat settled 4 cents to 10 cents lower, with July at $3.88 a bushel; corn was 2.50 cents to 15 cents higher, with July at $3.36 a bushel; oats were 3.50 cents to 15 cents higher, with July at $3.08 a bushel, and soybeans were 20 cents to 45 cents higher, with July at $9.74 a bushel.

World sugar futures rallied above 15 cents a pound for the first time since mid-1981 on New York’s Coffee, Sugar & Cocoa Exchange.

The bull market is being driven by tight supplies worldwide and fears of drought damage to the U.S. sugar beet crop.

“The market’s gone berserk,” said Erik Dunlaevy, a trader for Balfour Maclaine Corp.

Sugar for October delivery settled 0.71 cent higher at 15.27 cents a pound;.

Silver futures prices bounded higher for the second straight day on New York’s Commodity Exchange in a rally motivated by technical factors and the threat of a miners strike next week in Peru.

“I’m very bullish on silver,” said Peter Cardillo, commodity futures trading adviser with Josephthal & Co. in New York. “Silver looks like a white horse ready to stampede.”

Gold moved lower as many banks raised their prime lending rate, cooling fears of inflation.

Gold was $1.70 to $1.90 lower, with August at $439.90 an ounce; silver was 11.5 cents to 13.6 cents higher, with July at $7.28 an ounce.

Rising interest rates and a tentative labor agreement by Canadian paper workers pressured lumber futures on the Chicago Mercantile Exchange, where the contract for July delivery settled $6 lower at $193.80 per 1,000 board feet.

Livestock and meat futures ended mostly higher in heavy trading on the Chicago Merc, reversing the recent drought-influenced pattern of sharply lower prices for summer and fall deliveries.

Analyst Philip Stanley of Thomson McKinnon Securities called the turnaround a technical correction.

Tables, Page 8