U.S. grains: Prices soar as fund money flows to commodities

(Lisa Guenther photo)

Chicago | Reuters — U.S. grain and soy futures jumped on Tuesday as investors sunk money into commodities, extending a run-up in prices linked to poor weather that has hurt harvests in South America.

Commodity funds were net buyers of up to 14,000 corn contracts and 11,000 soybean contracts, a hefty amount that helped lift nearby soy futures to their highest price since November 2014, traders said.

Front-month soybean meal reached its highest price since July 2015 as funds bought an estimated 5,000 lots. The most actively traded meal contract hit levels not seen since December 2014.

The gains were “really more of a capital flow issue more than anything else,” said Steve Erdman, president of broker EFG Group in Chicago.

“It’s money seeking returns,” he said.

July soybeans, the nearby and most-active contract, closed up 1.5 per cent at $10.80-1/4 a bushel at the Chicago Board of Trade (all figures US$). July meal surged 2.2 per cent to $369.10 per short ton.

July corn ended up 0.8 per cent at $3.97 after touching the highest price for a most-active contract in almost a month. July wheat gained 1.5 per cent at $4.81-3/4 following a move to $4.84-1/2, a two-week high for the most-active contract .

Commodity funds bought up to 5,500 wheat contracts, traders said.

Renewed interest in commodities from investors and concerns about shrinking South American harvests have catapulted prices higher over the past two months, after the most actively traded soybeans hit a six-year low in November. Crop damage from poor weather is expected to shift export demand to the United States from rival shippers Brazil and Argentina.

In Brazil, growers of winter corn must renegotiate delivery contracts for forward sales, curtailing exports of the grain, after dryness caused severe losses, specialists said.

Farmers there will begin harvesting the winter crop in the coming weeks, and the heaviest losses are expected in the leading two producer states of Mato Grosso and Goias, which together account for half of the national output.

Still, global crop supplies remain ample after strong harvests in recent years, said Jim Gerlach, president of A/C Trading in Indiana.

“This is more to do with money flow than potentially running out of anything,” he said about Tuesday’s gains.

In the energy sector, U.S. crude oil futures hit seven-month highs.

Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Julie Ingwersen in Chicago, Naveen Thukral in Singapore and Sybille de La Hamaide in Paris.

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