Grain and soybean futures prices tumbled Wednesday on the Chicago Board of Trade as showers in the drought-stricken Midwest created panic in the trading pits and spurred some of the steepest declines in the exchange's history.
On other exchanges, cotton futures plunged, livestock and meat were broadly mixed, precious metals were lower, energy futures were mostly lower and stock index futures retreated.
"It was just panic liquidation" on the grain markets, said Jay Homan, an independent oat trader.
Many traders who had bet on higher prices and worsening crop yield prospects rushed to sell in reaction to heavy rains in Wisconsin and Illinois, and lighter showers in Indiana, Minnesota, Iowa, Missouri and South Dakota.
Most contracts for future deliveries of corn, oats and soybeans plunged their daily limits at the opening on the Chicago Board of Trade.
But the price limits on contracts for July delivery of grains and soybeans were routinely removed Wednesday pending the July 20 expiration of those contracts. Without limits, prices for July delivery fell freely.
July soybeans finished 83.50 cents a bushel below Tuesday's settlement price; all other soybean contracts were limited to losses of 45 cents. July corn plunged 28.50 cents a bushel and July oats dropped 38 cents. Other corn and oat contracts were permitted to fall only 15 cents.
Mario Balletto, a soybean analyst with Merrill Lynch Capital Markets Inc. in New York, said the markets overreacted to the rain. "You always see some rain somewhere in the middle of a drought," he said. "But everybody wants it to be bone dry or else they get nervous."
Despite the rain, no one was declaring an end to the drought.
The National Weather Service predicted above-normal temperatures and below-normal rainfall for most of the Midwest in both its 6-to-10-day and 30-day forecasts.
"We see the drought continuing," Balletto said.
Wheat settled 11.50 cents to 19.75 cents lower, with the contract for delivery in July at $3.5350 a bushel; corn was 15 cents to 28.50 cents lower, with July at $3.09 a bushel; oats were 15 cents to 28 cents lower, with July at $3.35 a bushel, and soybeans were 27.25 cents to 83.50 cents lower, with July at $9.31 a bushel.
The crashing grain markets also had a resounding impact at the Chicago Mercantile Exchange, where livestock and meat traders scurried to undo their "drought spreads," analysts said.
The sharp rise in grain prices in recent weeks had stirred livestock traders to bet on falling cattle and hog prices through the end of the year, followed by a sharp rise in prices next year.
But as grain prices turned around and began to fall, livestock traders bid up the price for summer and fall deliveries and sold off contracts for 1989 delivery, analysts said.
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