February 20, 2012

Global grain prices rise amid weather worries

Worldwide prices for wheat, corn and soy have risen on worries that adverse weather may have harmed crops in Europe and South America.

Investors on Friday speculated that demand for all three crops will improve. Wheat prices rose 2.4%, while corn and soy were up nearly 1%.

Global wheat supplies are plentiful so far but there has been speculation that freezing winter weather hurt crops in parts of Europe, which could cut into stockpiles.

Corn and soy supplies are already tight worldwide. Investors are speculating that inventories will shrink even more as details become available about potential crop damage from hot weather in Brazil and Argentina, Telvent DTN analyst Darin Newsom said.

In a report issued last week, the USDA estimated global wheat stockpiles at 213.1 million tonnes by the end of the summer. Global corn supplies were forecast at 125.4 million tonnes and soy stockpiles were estimated at 60.28 million tonnes.

"The market itself believes it's much tighter than what the government said and so that would indicate subsequent reports will show further tightening," Newsom said.

Other commodities were mixed as investors re-evaluated their holdings as a precaution in case there are developments in the Greek debt crisis over the President's Day weekend.

Negotiations over the best way to fix Greece's financial troubles have weighed on the market most of the week. Finance ministers from countries that use the euro will meet Monday to discuss another bailout package for Greece. US markets will be closed Monday for the Presidents' Day holiday.

Investors have been concerned that Greece could default on its massive debt if the funding isn't available before a deadline next month. That could cause slower economic growth and less demand for commodities.

Oil prices rose on prospects for slower deliveries from the Middle East if Iran continues to clash with Western nations over its nuclear programme.