010161 Friday's Commodities Roundup

New York - Energy futures closed higher in thin trading at the New York Mercantile Exchange Friday as locals and small speculators drove prices up on technical selling, analysts said.

March Crude futures rose as high as $29.98 before settling at $29.77 a barrel, up 41 cents.

“Rumors were circulating that there were buy stops above $30,” said Ed Silliere, vice president risk management at Energy Merchant.

Heating oil for February delivery rose 1.55 cents to 84.56 cents per gallon, receiving a boost from private forecasts of below normal and much below normal weather in the next 11 to 15 days in the East Coast, Silliere said. And forecasts of frigid temperatures in Europe and Russia during the next two weeks also supported futures.

However, heating oil supplies are near year-ago levels, and lingering fears of a winter supply crisis have dissipated.

February gasoline futures rose only modestly Friday, settling at 88.55 a gallon, up .65 cent. Natural gas for February delivery fell 1.4 cents to $7.256 per 1,000 cubic feet.

In other trading, concerns that demand for U.S. feed grains will be crimped by the spread of Bovine Spongiform Encephalopathy, and heavy speculative selling, sent grain futures prices tumbling on the Chicago Board of Trade.

“Talk of mad cow disease has the grain market terrorized with fear that feed usage will dwindle,” said Steve Bruce, a grain trader with ED&F Man in Chicago.

Although no case of BSE has been found in the U.S., the market was made more jumpy by a quarantine of Texas cattle ordered this week, with the possibility they were fed animal parts, which is thought to be the cause of BSE. There's been a growing outbreak of BSE in Europe, with a resulting decline in beef consumption.

“If beef consumption decreases because of the mad cow fear that means less corn is needed to feed livestock,” added Bruce.

CBOT corn futures dropped to four-month lows and soybean prices dropped to make new contract lows. March corn tumbled to finish 4 cents lower at $2.0950 per bushel and March soybeans plummeted to finish 5.75 cents lower at $4.6025.

Traders and analysts said the fear is a steep drop in meat consumption could spill over into the U.S. The markets are extremely “export sensitive,” with record corn and soybean supplies looming world wide.

“The agriculture community lives and dies off of exports and domestic usage,” said Jim Bower, of Bower Trading, a grain brokerage firm based in Lafayette, IN.

“The news stories about mad cow disease in Europe have put the corn market on the defensive here in U.S.,” added ED&F Man's Bruce.

The issues are expected to take their toll on the soybean meal market as well, according to experts. Soymeal is made from soybeans and is used to feed livestock, poultry and hogs.

“We could see soy meal usage decline if the demand for meat, pork and chicken drops,” said Brian Scott, a grain trader with Allendale Inc. in Chicago.

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