New drought worries send corn, soybeans soaring

Prices for corn and soybeans rocketed 5 percent higher Monday on new dry-weather forecasts that heightened worries the nation's top two crops will experience off years due to a worsening drought.

In other markets, natural gas futures rose to a six-month high and coffee soared.

Dryness concerns sent soybean futures to a 17-month high on the Chicago Board of Trade, while corn rose the maximum allowed under the exchange-imposed trading limit.

Market watchers said a potent combination of weather-related developments powered the rally.

Forecasts for weekend rains in the Midwest, which sent prices sinking last Thursday and Friday, didn't pan out as expected. A nationally televised farm show on Saturday predicted very dry, warm weather for all of May. And earlier calls for rain next weekend evaporated in revised forecasts.

All those factors helped spur the unlikely event of a wild drought rally by traders who came to work carrying umbrellas on a rainy Chicago day.

''This is the kind of crop volatility we haven't seen for a long time,'' said Tim Hannagan, grains analyst for Alaron Trading Corp. in Chicago. ''But I think it's going to get worse. With all the talk of the long term being hot and dry and carryover stocks being down, we've got a lot ahead of us.''

The problem of abnormally dry soil conditions is exacerbated because crop planting is way ahead of schedule due to the mild weather. A U.S. Department of Agriculture report released after markets closed showed 49 percent of the nation's corn crop planted as of Sunday, compared with the historical average of 23 percent.

Soybeans also have been planted at more than twice the usual pace - 8 percent, compared with the past average of 3 percent.

Dry May weather means crops will emerge poorly and develop weak root systems, causing shortcomings that even late-spring rains wouldn't be able to offset.

Corn for July delivery rose the limit 12 cents to $2.44 a bushel, while July soybeans rose 28 cents to $5.67 a bushel. Wheat prices were buoyed by the rally despite favorable crop conditions in the winter wheat belt; July wheat rose 10 cents to $2.64 a bushel.

Natural gas prices flowed sharply higher on the New York Mercantile Exchange amid shrinking production and dwindling storage levels. U.S. production declined nearly 3 percent in the first quarter of 2000, according to an industry survey, while storage is down 25 percent from a year ago.

With the approach of summer cooling season, those data have investors nervous.

June natural gas rose 7.5 cents to $3.216 per 1,000 cubic feet after reaching a six-month high of $3.235 - the highest for a front-month contract since Oct. 28, 1999.

Coffee prices jumped amid speculation that major producers who meet next week in London are making progress toward adoption of a retention plan which, as OPEC did in the oil market, would withhold supplies to drive world prices up.

July coffee settled up 5.55 cents at $1.031 a pound after reaching $1.038 on New York's Coffee, Sugar & Cocoa Exchange.