The Wall Street Journal-20080112-Grains Rally- Gold Ends Near --36-900
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Grains Rally, Gold Ends Near $900
Bullish crop reports issued Friday by the Agriculture Department reverberated from grains markets into other commodities as the high prices sparked concerns about growing inflationary pressures, analysts said.
U.S. grain and soybean futures directly affected by the reports rallied on smaller-than-expected estimates for corn supplies and total winter wheat plantings.
Gold and cotton futures, meanwhile, felt spillover support amid concerns about rising inflation and limited acreage, analysts said. Gold crept toward $900 an ounce, settling less than $4 below it. Livestock futures fell as costs to feed animals will be even higher in coming months.
Chicago Board of Trade corn futures hit fresh 12-year highs during the session. Nearby March futures rose 20 cents a bushel, which is the exchange-imposed daily allowable trading limit, settling at $4.95. Support stemmed from ideas that a drop in corn supplies will require the market to secure millions more acres for 2008 plantings, analysts said.
The corn market will have to battle soybeans and wheat for the acres, as all the markets are vying for increased area to increase production and loosen up tight supplies. U.S. wheat futures rallied to record highs in 2007 on historically low supplies, and wheat-industry members were hoping the USDA's seeding report would reveal strong gains in planted acreage. Nearby March wheat rose 26.75 cents a bushel to $9.0925.
CBOT November soybeans, which represent the next crop to be planted, closed up the daily exchange-imposed price limit.
"People are scared to death now that the tug of war between beans and corn is going to persist through November 2008 and maybe in the 2009 crop," said Peter Meyer, senior vice president for Lehman Brothers.
Prices for cotton soared as traders grappled with the USDA's larger- than-expected estimate for one class of wheat, soft red winter wheat. Both crops are planted in the Southeast and Delta.
In the gold market, nearby-month January gold rose $4.40 an ounce to $896.10 on the Comex division of the New York MercantileExchange. It was up $33, or 3.8%, on the week. The active February contract traded as high as $900.10 an ounce, settling at $897.70.
The rally came amid ideas that the agricultural surge will contribute to inflationary pressure, said Dan Vaught, analyst for A.G. Edwards & Sons. The impact of the grains rally on gold was impressive given that the dollar was firmer and energies lower, analysts said.
Oil futures slid to their lowest close in three weeks on Nymex, falling $1.02, or 1.1%, to $92.69 a barrel. Futures lost 5.3% on the week, snapping a string of four weekly advances.
