Tags: Commodities | crop | Forecasts | Cut | Fed | Debt

Commodities Soar as Crop Forecasts Cut, Fed May Buy More Debt

Friday, 08 Oct 2010 01:13 PM

Commodity prices surged to the highest level in almost two years after the U.S. government cut its crop-supply forecasts and the dollar slumped on speculation the Federal Reserve will buy more debt to revive the economy.

The Reuters/Jefferies CRB Index of 19 raw materials jumped as much as 2.6 percent to 294.68, the highest level since Oct. 15, 2008. Wheat, soybeans and corn were the biggest gainers, each jumping the most allowed by the Chicago Board of Trade. Copper advanced to a 27-month high on the Comex in New York and gold increased as much as 1.2 percent.

Since the end of May, the CRB Index has rallied 15 percent and the dollar slid 11 percent against a basket of six major currencies, as the U.S. sought to inject more cash into the economy and spur growth. The dollar dropped today below 82 yen for the first time in 15 years as a U.S. payrolls report showed employers cut more jobs last month than economists forecast.

“Everybody is printing more money except emerging markets, and those guys are buying commodities,” said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. “We’re going to have an inflationary spike. This is a perfect storm for commodities going higher.”

The CRB rose 2.3 percent to 293.75 at 12:32 p.m. in New York, heading for a seventh straight weekly gain and the biggest one-week rally since July. The six-currency U.S. Dollar Index is heading for a fourth straight weekly decline.

Crop Forecasts Cut

The U.S. Department of Agriculture today cut its domestic corn-crop estimate for the second time in as many months, predicting a 3.4 percent drop from last year. While farmers will collect the most soybeans ever, the total will be 2.2 percent less than forecast in September, the USDA said. Global wheat inventories will be 1.8 percent less than projected last month.

“The government has shocked the grain industry with the huge cut in U.S. production,” said David Smoldt, the vice president of operations for FCStone LLC in West Des Moines. “There will be some scrambling for supplies today.”

Corn futures for December delivery rose the 30-cent trading limit, or 6 percent, to $5.2825 a bushel in Chicago. Soybean futures for November delivery soared the 70-cent trading limit, or 6.6 percent, to $11.35 a bushel.

Wheat futures for December delivery jumped 57.25 cents, or 8.7 percent, to $7.165 a bushel as of 11:32 a.m. in Chicago, after soaring the 60-cent maximum to $7.1925.

Sugar, Cotton

Sugar rose to the highest price in almost eight months on concern that demand will outstrip supplies after adverse weather damaged crops in Brazil, the world’s biggest producer.

Raw sugar for March delivery climbed 1.16 cents, or 4.6 percent, to 26.31 cents a pound on ICE Futures U.S. in New York, after touching 26.68 cents, the highest price since Feb. 17.

Cotton futures jumped to a 15-year high after the USDA boosted a forecast for global demand. Textile mills will use 120.8 million bales in the year that began Aug. 1, up 0.2 percent from last month’s estimate, the USDA said. Worldwide output will be 116.7 million bales, down from the September forecast of 117 million.

Cotton for December delivery rose 2.83 cents, or 2.7 percent, to $1.0658 a pound on ICE in New York. Earlier, the price touched $1.0775, the highest level for a most-active contract since June 19, 1995. Before today, the price gained 66 percent in the past 12 months.

Metals Gain

Gold futures for December delivery rose $10.60, or 0.8 percent, to $1,345.60 an ounce. Before today, gold climbed 22 percent this year, reaching a record $1,366 an ounce yesterday.

Copper futures for December delivery increased 9.85 cents, or 2.7 percent, to $3.778 a pound, after reaching $3.8015, the highest level for a most-active contract since July 8, 2008.

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Commodity prices surged to the highest level in almost two years after the U.S. government cut its crop-supply forecasts and the dollar slumped on speculation the Federal Reserve will buy more debt to revive the economy.The Reuters/Jefferies CRB Index of 19 raw materials...
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2010-13-08
Friday, 08 Oct 2010 01:13 PM
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