Commodities Cap Biggest Five-Day Slide Since 2009 as China May Slow Buying

Commodities capped the biggest five- session slide since July 2009 on concern that China will seek to slow its economic growth, curbing raw-material demand in the country that is leading the global recovery.

The Thomson Reuters/Jefferies CRB Index of 19 raw materials fell 3.2 percent to settle at 296.22 at 5:34 p.m. in New York. The gauge has dropped 7.2 percent since Nov. 9, the biggest five-session decline since July 2009. Earlier, the measure touched 296.2, the lowest since Oct. 22. The dollar rose to a seven-week high against a basket of six currencies.

Premier Wen Jiabao said today the cabinet is drafting measures to counter the fastest inflation in two years. China may impose price limits on food and toughen punishment for those found speculating on agriculture, the China Securities Journal said, citing an unidentified person. The CRB has gained 15 percent since June 30, led by cotton, corn and sugar.

“The concerns about further monetary tightening in China, that’s caused a big selloff,” said Nic Johnson, a commodity portfolio manager at Newport Beach, California-based Pacific Investment Management Co. “People had bid up a lot of these commodities. Now, what you’re seeing is a healthy correction back toward where fundamental demand levels are.”

The CRB’s decline today was led by nickel, wheat and aluminum. Wheat plunged the most in three months. Copper tumbled the most in four months, while gold fell to the lowest in almost two weeks.

Corn slumped to the lowest price in five weeks and soybeans tumbled as much as 5.4 percent. China, the world’s top oilseed buyer, has boosted corn imports this year.

Dollar Rebound

The dollar has gained seven times in eight sessions. Cotton climbed to a record last week, while copper, corn and soybeans reached two-year highs.

“Some of the bullish catalysts have shrunk with the idea that the dollar is on much more firm footing,” said James Cordier, a portfolio manager at OptionSellers.com in Tampa, Florida. “What we’re seeing today is what happens when you have a crowded space, like commodities have been, get a little bit of negative news, and everyone hits the exit at the same time.”

Cotton is up 71 percent this year, the most among futures tracked by the CRB, followed by silver, up 50 percent, and coffee, up 47 percent.

“We’ve had a pretty good run in the commodity market for the last couple months,” said Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago. “Now, we’re just kind of seeing the market go through a little correction, maybe consolidation phase.”

Raw materials may rebound on bullish fundamentals Cordier of OptionSellers.com said.

“While the liquidation might not be over with one day of selling, you do want to look for certain commodities to buy back on this big dip,” Cordier said. He cited sugar, copper, cocoa, gasoline and crude oil as a “good buy.”

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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