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".
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
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."
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
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.
Wheat's strength was one reason for corn showing gains too, ending up 1.1% at $7.82 a bushel for
"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
'Did we hit rationing
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
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
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