960424

Grain, oil prices continue rally

CHICAGO: Grain and oil prices continued to shoot higher on Tuesday in the biggest rally in years on supply worries, but nervous profit-taking by dizzy speculators in many commodities took some of the heat off those markets.

Wheat and corn surged to contract highs on fears of crop damage, and petroleum prices gained as talks aimed at allowing Iraq to resume oil exports were postponed and appeared to be foundering.

Coffee and cocoa, which had been strong in recent days retreated.

Natural gas, live cattle, live hogs, copper and cotton were also weaker.

The Knight Ridder-Commodity Research Bureau's index of 17 commodity futures closed at 261.07, down 0.67 point, but not before setting an eight-year high at 262.21 early.

Wheat futures roared ahead, setting new season's highs after a government report confirmed worsening conditions for the vital U.S. wheat crop this year.

The U.S. Agriculture Department on Monday rated 45 percent of the U.S. winter wheat crop poor to very poor, up from 43 percent in that category a week ago.

"Fear is definitely the major market mover out there right now. The way wheat came back on the close shows a lot of cause for concern," said Steve Bruce of E.D. & F. Man International.

At the Chicago Board of Trade May wheat ended 25-1/2 cents per bushel higher at $6.53-1/2 after trading as low as $6.35.

The May contract is now up 36 percent since the start of the year and 86 percent in the last 12 months, all on the back of the biggest worries in years about available supplies.

The U.S. Agriculture Department said April 11 that this year's wheat stocks, pared down by years of government sales of stockpiles and by recent booming exports, are due to be the lowest since 1948.

Corn prices on Tuesday also surged to all-time highs on fears that drought in wheat areas may spread to the Corn Belt or current cold Midwest weather may delay corn plantings.

May corn closed at $4.78-1/2 a bushel, up 8-1/2 cents.

Agriculture Secretary Dan Glickman predicted Tuesday that U.S. farm prices would remain strong for the next 10 years and repeated statements that the Clinton administration is not considering restricting exports despite low grain stocks.

"We are not thinking about restricting exports. That is of no interest to me," Glickman told a bankers conference in Washington. But he would prefer prices to move "a little more gradually," he added.

Meanwhile, oil prices also rose sharply after news that problems had developed late Monday in the U.N.'s talks on allowing Iraq to resume oil sales. The talks were postponed until Wednesday.

Iraq's chief negotiator Abdul Amir al-Anbari said he had received a new draft agreement from the U.N. containing significant changes to the draft agreement reached last week.

June crude oil closed up $1.17 at $22.70 a barrel and May heating oil ended up 2.24 cents at 57.30 cents a gallon. May gasoline ended up 2.99 cents at 73.18 cents a gallon.

The U.S. Energy Department expects a year-on-year 2.0 pct rise in gasoline demand this summer.-Reuter