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.