Commodities Advance to Two-Year High Led by Agriculture Futures

By Tony C. Dreibus

Oct. 11 (Bloomberg) -- Commodities rose to the highest in two years, led by agriculture futures, after a U.S. Department of Agriculture report last week showed corn production in the country would decline more than expected by analysts.

The Standard & Poor’s GSCI Index of 24 raw materials rose as much as 1.3 percent to 571.4810, the highest level since Oct. 3, 2008. The UBS Bloomberg Constant Maturity Commodity Index climbed to 1,490.731, the highest since Aug. 27, 2008. Corn futures gained as much as 8.5 percent and soybeans jumped to a 16-month high.

U.S. corn production will total 12.664 billion bushels, the U.S. Department of Agriculture said Oct. 8. That’s below the average estimate of 26 analysts surveyed by Bloomberg News for 12.977 billion bushels. Yields will be 155.8 bushels an acre, the USDA said, compared with analysts’ forecast of 160.2 bushels an acre.

“Friday’s news has been exceptionally bullish for the markets,” said Sudakshina Unnikrishnan, an agricultural commodities analyst for Barclays Capital in London. “If one looks at current prices, I don’t think we’re close to peaks. There is still further upside from the current levels.”

Corn futures for December delivery surged 42.75 cents, or 8.1 percent, to $5.71 a bushel at 10:34 a.m. London time on the Chicago Board of Trade. The price has gained 23 percent since Oct. 1.

Barclays forecast the grain’s fourth-quarter average price at $5.24 a bushel before the report, Unnikrishnan said. The first quarter average was expected to be about $5.40 a bushel.

‘See a Scramble’

Soybeans for November delivery rose 43.5 cents, or 3.8 percent, to $11.785 a bushel in Chicago. The price has jumped 7 percent this month. Wheat futures for December delivery gained 8 cents, or 1.1 percent, to $7.2725 a bushel.

With corn prices rising, more growers will plant the grain instead of soybeans and wheat, Unnikrishnan said.

“The fact that corn prices are looking more attractive, we could see a scramble for acres tilting in favor of corn,” Unnikrishnan said. “We see soybean prices needing to push up in terms of planting. In feed substitution with wheat, prices need to push up.”

Sugar for March delivery gained 0.88 cent, or 3.3 percent, to 27.2 cents a pound on ICE Futures U.S. in New York. The price earlier touched 27.24 cents a pound, the highest in almost eight months, on speculation that crops in Brazil, the world’s largest supplier of the sweetener, will be harmed by drought that lasted through mid-September.

Silver for immediate delivery jumped as much as 1.6 percent to $23.6325 an ounce, the highest since March 13, 1980. Silver for December delivery gained 0.8 percent, also extending a rally to a 30-year high.

Gold for immediate delivery rose $1.86, or 0.1 percent, to $1,348.60 an ounce. Futures for December delivery climbed $6.70, or 0.5 percent, to $1,347 an ounce. The most-active contract has gained 23 percent this year.

--Editors: John Deane, Dan Weeks.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

Corn Jumps to Two-Year High After U.S. Cuts Supply Outlook

By Supunnabul Suwannakij

(Bloomberg) -- Corn futures in Chicago surged to the highest level in two years after the U.S. Department of Agriculture last week cut its supply forecasts. Soybeans and wheat also advanced.

Corn futures for December delivery rose the 45-cent daily limit, or 8.5 percent, to $5.7325 a bushel on the Chicago Board of Trade. That’s the highest level since September 2008. The U.S. Department of Agriculture on Oct. 8 cut its domestic corn- crop estimate for the second time in as many months, predicting a 3.4 percent decline from last year after flooding in June and hot, dry weather in August cut Midwest yields.

“Corn continues to draw strength from the bullish USDA report,” Luke Mathews, commodities strategist at Commonwealth Bank of Australia, said by phone from Sydney. The “USDA expects U.S. corn supply in 2010/2011 to contract to the tightest level in 15 years.”

U.S. corn production will total 12.664 billion bushels, down from 13.16 billion projected a month ago and less than last year’s record 13.11 billion, the USDA said in a report. The average estimate of 26 analysts surveyed by Bloomberg News was for 12.977 billion bushels.

Soybean futures for November delivery gained as much as 4.4 percent to $11.8475 a bushel in Chicago, the highest price since June 5 last year. They traded at $11.7475 a bushel at 9:52 a.m. in Singapore.

Wheat futures for December delivery advanced as much as 2.9 percent to $7.3975 a bushel, before last trading at $7.2975 a bushel.

U.S. Supplies

Unsold U.S. corn supplies on Sept. 1, 2011, before next year’s harvest, will total 902 million bushels, compared with the month-ago forecast of 1.116 billion and 1.708 billion this year, the USDA said. Analysts expect reserves of 1.15 billion bushels.

The U.S. soybean crop will be a record 3.408 billion bushels (92.8 million metric tons), compared with 3.483 billion projected in September and 3.359 billion gathered last year, the USDA said. August rains failed to boost yields, and the government reduced its acreage estimates. Analysts in the Bloomberg survey expected 3.501 billion bushels.

Global wheat stockpiles will total 174.66 million metric tons on May 31, down 1.8 percent from 177.79 million estimated last month, the USDA said. The average estimate of 13 analysts in a Bloomberg News survey was 177.43 million tons.

--Editors: Richard Dobson, Matthew Oakley.

To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

Soybeans Technicals from Reuters

SINGAPORE, Oct 6 (Reuters) - The CBOT soybean November futures contract <SX0> is expected to fall back to Monday's low of $10.42 per bushel as its rebound on Tuesday has ended.

The rebound was regarded as a pullback towards an ascending trendline drawn though the Sept 14 low at $10.25 and the Sept 16 low at $10.33. It was also deemed as a pullback towards the neckline of a bearish head-and-shoulders pattern.

The ascending trendline touches $10.76, the 50 percent Fibonacci retracement level on the fall from $11.09-¾   to $10.42, and a strong resistance has formed over there to prevent a further rebound.

Only a rise above $10.90 would invalidate the bearish outlook