October 6, 2010
 

US corn, wheat advances amid weakening dollar

Corn and wheat advanced, extending a rally that drove commodity prices to the highest level in more than two years, on assumption that a weakening dollar will raise demand for US crops.

December-delivery corn gained as much as 1% to US$4.96 a bushel in CBOT and was at US$4.925 at 4:04 p.m. in Tokyo. The contract jumped 4.1% yesterday, the most in more than a week, after touching a one-month low of US$4.5425 on October 4.

The UBS Bloomberg Constant Maturity Commodity Index climbed to 1,440.11 yesterday, the highest level since August 29, 2008, as the Dollar Index declined 0.9%. Grains and soy rose, gold rallied to a record, and oil gained to a five-month high.

"The dollar's drop has pushed most commodities higher, including grains, gold and oil. Again, commodities were more attractive than other assets to speculative funds," said Han Sung Min, a futures broker at Seoul-based Korea Exchange Bank Futures Co.

The dollar fell as much as 0.1% today to the lowest level since January against a basket of six currencies. Federal Reserve Chairman Ben S. Bernanke said earlier this week that the US central bank may buy more debt to help the economy. The Bank of Japan yesterday pledged to keep its benchmark interest rate at "virtually zero" percent.

A weaker dollar boosts the appeal of US crops to overseas buyers holding other currencies and also increases demand from investors looking for alternative assets.

Corn has rebounded this week after losing 11% last week, the most in eight months as the US harvest advanced and the USDA said that supplies left from last year's crop climbed to the highest level since 2006.

Production may fall to 12.977 billion bushels from a record 13.11 billion last year, according to a Bloomberg News survey. On September 10, the USDA reduced its estimate to 13.16 billion bushels from 13.365 billion in August. The agency will update its projection on October 8.

Wheat for December delivery advanced as much as 1.5% to US$6.7325 a bushel and last traded at US$6.69. The contract rose 2.5% yesterday, the first gain since September 24. The grain dropped 10% in the six sessions through October 4 partly because crops in Russia and Eastern Europe received rain.

Soy for November were little changed at US$10.71 after earlier climbing as much as 0.3% to US$10.7525 a bushel. The price reached a 15-month high of US$11.44 on September 27.