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Commodities Plunge Most in Three Months, Led by Metals, as Dollar Surges

Commodity prices plunged the most in three months as slowing Chinese manufacturing and budget gaps in Europe spurred speculation that the global economic recovery will recede, curbing demand for raw materials.

The Reuters/Jefferies CRB Index of 19 raw materials fell 2.3 percent to 271.6, the biggest slide since Feb. 4. Nickel, silver and gasoline led the declines. Crude oil dropped the most in three months, and copper slipped to a nine-week low.

Manufacturing in China, the world’s biggest metal user and second-largest energy consumer, fell to a six-month low, an industry report showed today. U.S. equities dropped the most since February on concern that Europe’s debt crisis will spread.

“The two issues causing concern are China and Europe,” said Brian Hicks, who helps manage about $1.5 billion at U.S. Global Advisors in San Antonio. “These events are shocking the commodity markets. People are fleeing from risk and looking to get to the sidelines.”

The UBS Bloomberg Constant Maturity Commodity Index of 26 prices dropped 2 percent to 1,288.69.

Oil futures for June delivery fell $3.45, or 4 percent, to $82.74 on the New York Mercantile Exchange, the lowest settlement since April 27. It was the biggest drop since Feb. 4. The price has climbed 4.3 percent this year.

Oil dropped as the dollar climbed to the highest level versus the euro in a year. Yesterday, prices topped $87 a barrel for the first time in three weeks on signals the U.S. economic recovery is accelerating.

Equities ‘Pounded’

“Prices are considerably lower because the dollar is very strong and equities are being pounded,” said Addison Armstrong, a director of market research at Tradition Energy, a Stamford, Connecticut-based procurement adviser. “There’s been a strong reversal over the last 24 hours after we failed to hang above $87 for a second time.”

Yesterday, oil reached a 19-month high of $87.15.

Copper futures for July delivery dropped 11.5 cents, or 3.5 percent, to $3.1785 a pound on the Comex in New York. Earlier, the price touched $3.172, the lowest level for a most-active contract since Feb. 25.

Prices declined 5.6 percent in April, the first monthly decline since January, partly on concern that China’s efforts to cool its economy will erode demand for industrial commodities.

‘Tough Time’

“China is the driver,” said Donald Selkin, the chief market strategist at National Securities Corp. in New York. “People are worried about what impact their tightening will have, and this manufacturing report shows things are already slowing. Copper will have a tough time.”

In London, nickel plummeted the most since January 2009 and lead plunged 7.6 percent.

Sugar tumbled to a one-year low in New York on speculation that India, the world’s biggest consumer, may become a net exporter next year.

Production may exceed annual demand of 23 million metric tons, Farm Minister Sharad Pawar said yesterday. Output is forecast at 24 million to 25 million tons, up from 18.5 million this year, Paris-based Sucres et Denrees SA, one of the world’s biggest sugar traders, said last week. Imports jumped in recent months after adverse weather cut the cane crop.

“News of rising production in India is keeping prices depressed,” said Bruno Lima, a risk-management consultant at FCStone in Campinas, Brazil. “Buyers are staying away from the market.”

Raw sugar for July delivery fell 0.47 cent, or 3.1 percent, to 14.51 cents a pound on ICE Futures U.S., the third straight decline. Earlier, the price touched 14.41 cents, the lowest level for a most-active contract since May 1, 2009. The commodity has slumped 46 percent this year.

Commodities settled as follows:

Precious metals: June gold down $14.10 to $1,169.20 an ounce July silver down 9.98 cents to $17.842 an ounce July platinum down $43.10 to $1,685.80 an ounce June palladium down $33.00 to $515.25 an ounce

Livestock: June live cattle up 0.5 cent to 96.025 cents a pound August feeder cattle down 0.05 cents to $1.166 a pound June lean hogs down 0.175 cent to 86.75 cents a pound July pork bellies up 1 cent to $1.005 a pound

Grains: July soybeans up 0.5 cent to $9.87 a bushel July corn down 2.5 cents to $3.69 a bushel July wheat up 9 cents to $5.1075 a bushel July oats down 4.75 cents to $2.0825 a bushel

Food and Fiber: July coffee down 1.05 cents to $1.375 a pound July cocoa down $61 to $3,172 a metric ton July cotton down 1.94 cents to 81.29 cents a pound July sugar down 0.45 cent to 14.51 cents a pound July orange juice up 0.05 cent to $1.3745 a pound

Energy: June crude oil down $3.45 to $82.74 a barrel June natural gas up 1.3 cents to $4.013 per million British thermal units June heating oil down 8.56 cents to $2.2595 a gallon June gasoline down 11.29 cents to $2.3222 a gallon

Others: July copper down 11.5 cents to $3.1785 a pound July lumber down $7.30 to $293.10 per 1,000 board feet

To contact the reporters on this story: Millie Munshi in New York at mmunshi@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net.

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