U.S. corn, soybean and wheat futures surged Wednesday in line with a broad rally across commodity markets as an inflow of fund money and signs of an improving economy resumed the hot streak of 2010.
The rally stoked fears that food prices will rise to troublesome levels, with the United Nation’s food agency saying food prices hit a record high last month — above those that prompted riots during the commodities surge of 2008.
The increase in futures prices come amid concerns over supply from Russia to Argentina to Australia, all major producers of grain and oilseeds shipped across the globe.
The one-percent rise in the dollar, which typically has an inverse price relationship with commodities, failed to dampen the more than 1 percent rise in corn and soy futures. Corn and soybeans soared in the last week of 2010, with both hitting 29-month highs early on Monday.
Wheat futures surged more than 2 percent Wednesday, led by futures for higher protein wheat at the Kansas City Board of Trade.
“Nothing has changed fundamentally. Everything went down on profit-taking and liquidation, but the fundamentals are still bullish,” said Matt Pierce, an analyst for GrainAnalyst.com.
Wheat prices have been supported by excessive rains in Australia downgrading the wheat quality, while hot, dry weather in Argentina has supported both corn and soybean futures.
CBOT March soybeans ended 24 cents higher at $13.93-1/2 per bushel and March corn 10-3/4 cents higher at $6.19-1/4.
CBOT March wheat rose 19 cents to $8.08-1/4 per bushel, near the highest price since early August. KCBT March wheat was up 24 cents at $8.73-1/4 per bushel, slightly below the two-year high set Monday.
Funds bought an estimate 12,000 corn contracts; 6,000 to 7,000 soybean contracts and 5,000 CBOT wheat contracts, traders said.
“My gut feeling is that trading will be really choppy until we get some more information, and that’s the crop report,” said Don Roose, an analyst at U.S. Commodities in West Des Moines, Iowa.
The U.S. Agriculture Department will release its monthly supply and demand report on Jan. 12.
“Everybody is nervous ahead of a key report next week, and so the bears and bulls each have their days,” said Dan Basse, president of AgResource Co.
In the meantime, all eyes will be on the weather.
“We looked at the Argentine rainfall pattern, and it wasn’t as robust as we would have liked to have seen in some of the areas of Cordoba, Santa Fe. So, with the forecast being dry for another 10 days, the market started to add back some premium,” Basse said.
Light showers this week benefited the pollinating corn crop in Argentina, but more dry weather is forecast and that could stress soybeans as the crop begins to set pods, said Don Roose, an analyst at U.S. Commodities in West Des Moines, Iowa.
“The soybeans still have the crucial time frame to go through yet (in Argentina) and we’re supposed to warm up again,” Roose said. “So it goes back to some of the same factors: China underneath the market on these breaks and we’re still not sure of the supply out of South America.”
China was seeking shipments of U.S. soybeans for shipments in March and November and also shipments from Brazil this spring, analysts and traders said.
Jeffrey Currie, global head of commodities for Goldman Sachs, said on Wednesday soybeans were a more attractive investment than wheat due to greater potential demand growth and a limited supply base.
GRAINS BUCK DOLLAR
The dollar index touched a one-week high following news that the U.S. private sector added more jobs than analysts had expected. A stronger dollar makes U.S. commodities less attractive to importers.
But commercial firms bought soybean and corn futures to take advantage of the recent break in prices.
“For grains, losses should be capped because of unfavorable weather in U.S., eastern Australia, China and Russia. The weather issue is still lingering and investors can’t really overlook it,” said Ker Chung Yang, an analyst at Phillip Futures in Singapore.
