Wheat prices hit their highest for a month as concerns for the Australian crop enhanced the grain's appeal to investors who leaped into commodities following the Federal Reserve's latest move to boost the US economy.

Prices of many raw materials gained, their appeal boosted by the potential for inflation, and dollar weakness, encouraged by the Fed's move to inject $40bn a month into the US economy through buying up mortgage-backed securities.

Brent crude rose to a four-month high of nearly $118 a barrel, with London copper also hitting its highest since early May, $8,411 a tonne.

'Buy real assets'

Bill Gross, the head of bond giant Pimco wrote on Twitter: "Fed to buy mortgages 'till the cows come home. Buy real assets... gold... a house."

Grain broker US Commodities said: "There is a fear that inflation will pick up a year from now," with commodities often viewed as assets able to keep up with general price rises.

"The decision by the Fed caused a weaker dollar, lower interest rates, higher crude oil, and a flight to hard assets," bringing "huge buying" to gold and silver, and putting "a bid under the grain market".

ANZ downgrade

Wheat rose particularly strongly on Agrimoney.com's revelation that Australia & New Zealand Bank had cut to 20m tonnes its forecast for the Australian harvest of the grain, below other estimates.

At US broker Country Futures, Darrell Holaday said: "Wheat has provided the leadership to the entire marketplace.

"An Australian bank overnight put the Australian wheat crop 20m tonnes. That was 2m tonnes below the lowest [alternative] estimate and 6m below the US Department of Agriculture forecast."

At Newedge, Dan Cekander, flagging the ANZ estimate, highlighted that it is "still relatively dry in Australia", a country on which the wheat market has been looking to help fill the void in export supplies caused by Russian drought and, in feed, by a drought-hit US corn crop.

'Sitting on a powder keg'

Also boosting wheat were the rising prices of Black Sea wheat, highlighted in offers to Egypt's latest tender, and technical factors, with Chicago wheat's recent firmness taking it back above its 10- 20-day and 50-day moving averages, and another much-watched line.

"Technically, we have been in this big consolidation phase in the charts, going sideways since late July," Mr Cekander said.

"That has taken us back over a downtrend line."

And at Benson Quinn Commodities, Brian Henry flagged potential support from demand Middle Eastern and North African countries keen to avoid letting food shortages stoke civil unrest.

"They are sitting on a powder keg," Mr Henry said.

"The last thing they want is food shortages, making people even more unhappy."

Price gains

Chicago wheat for December soared to $9.31 a bushel, its highest since August 10, before easing to end at $9.24 ¼ a bushel, a gain of 2.6%.

The Kansas December hard red winter wheat contract closed 2.7% up at $9.48 a bushel, its highest finish since July.

In Europe, Paris wheat for November closed up 0.9% at E266.50 a tonne, having hit a one-month high of E268.75 a tonne.

London wheat gained 1.2% to £207.00 a tonne, the highest finish for a spot contract since April last year.

Better yields

Wheat's strength was one reason for corn showing gains too, ending up 1.1% at $7.82 a bushel for December delivery.

"But oil is part of the reason too. We need to ration corn demand but that has not go any easier with oil prices rising, improving margins for ethanol producers," Mr Cekander said.

Still, the grain fell well back from its high amid continuing talk of better harvest results as combines roll in the north.

"We are hearing more talk of corn and soybean yields improving getting into the northern trading areas," Benson Quinn's Brian Henry said.

"In North Dakota, South Dakota, some parts of Iowa, yields seem to be better than expected, although they will not be able to carry the whole nation themselves."

'Did we hit rationing levels?'

Soybeans in fact turned negative in late deals, with a disappointing US crush figure adding to pressure.

US processors consumed 124.77m bushels of the oilseed last month, down 12.6m bushels on July and some 3.5m bushels below market estimates.

US Commodities, terming the data "poor", asked: "Did we hit rationing levels?" The question is clouded by capacity cuts at many plants last month for annual maintenance.

Meanwhile, Paul Georgy at Allendale earlier flagged that in soybeans "profit-taking is certainly occurring after the run up in price since Wednesday," noting too "anticipation of significant hedging pressure going into the weekend" as US producers ramp up harvest.

And as an extra downer to soybean futures, forecasts for Brazil turned wetter on the eve of sowings, easing concerns for dryness after a particularly hot dry season in main growing regions in the centre of the country.

November soybeans closed  0.5% lower at $17.39 a bushel

Cotton soars

Soft commodities found headway easier to come by, especially cotton, which gained continued support from strong US export sales data on Thursday, besides being, as an industrial commodity, particularly attuned to broader economic sentiment.

New York cotton for December soared 3.2% to 75.90 cents a pound.

And December arabica coffee wasn't far behind in New York for much of the day, hitting an intraday high of 183.70 cents a pound, the highest level since July.

The lost closed at 181.10 cents a pound, a gain of 1.3% on the day, and taking to 14% its recovery from an early-month low.

'Strong buying force'

The rebound has been fuelled by short-covering, after US regulatory data a week ago showed speculators having their highest net-short position in at least six years.

This was a factor that Commerzbank forecast might feed on itself, sending prices lower still, but which instead appears to have left investors wondering where the next short bets are coming from.

Their willingness to cover short positions has been further encouraged by evidence of demand  from Western importers, now that summer holidays are passed, besides the pressure on prices from the peak Brazilian harvest.

"There has definitely been a strong buying force of late and one would be wise to use the recent short covering rally as a gauge as to where this rally may start hitting some real resistance tempting the Brazils into the market," Sucden Financial said.

Furthermore, consultancy Somar has flagged the potential setback to the 2013 crop from current high temperatures, which have supressed flowering.