Commodities Touch Two-Year High on Economic Growth Outlook, Smaller Crops

Commodity prices jumped to the highest in more than two years on expectations for global economic growth and lower U.S. forecasts for agricultural inventories. Grains, oilseeds and coffee led gains.

The Standard & Poor’s GSCI Spot Index of 24 commodities advanced 1.2 percent to 643.82 as of 11:34 a.m. in New York, after touching 645.72, the highest since Sept. 26, 2008. The measure has rallied 21 percent in the past year.

“People are looking forward to a better economy this year, so they’re putting on the risk trade full-force,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago.

Industrial output in the euro area rose 1.2 percent in November from the month before, more than economists forecast, European Union data showed today. Germany’s economy, the continent’s biggest, jumped 3.6 percent last year, the most since data for a reunified country began in 1992, the government said today. Global growth will be 4.2 percent in 2011 after 4.8 percent expansion in 2010, the International Monetary Fund estimates.

Corn and soybeans jumped to the highest prices since July 2008 and wheat surged after the government cut its forecasts of U.S. inventories, signaling tighter food supplies as demand increases and adverse weather reduces harvests.

Production of corn in the U.S., the world’s largest grain exporter, dropped 4.9 percent last year and will leave supply before the 2011 harvest at the lowest in 15 years, the U.S. Department of Agriculture said. The USDA also cut its estimate of the soybean crop by 1.4 percent and said domestic wheat inventories will be 16 percent less than a year earlier.

‘All-Time Highs’

“With any weather issues, we’re going to make new all-time highs in corn and soybeans, and to a lesser degree, wheat futures,” said Dan Basse, the president of AgResouce Co., a commodity consultant in Chicago.

Corn futures for March delivery rose 23.5 cents, or 3.9 percent, to $6.305 a bushel at 10:14 a.m. on the Chicago Board of Trade. The price advanced as much as the exchange limit of 30 cents to $6.37, the highest since July 2008.

Soybean futures for March delivery soared 60 cents, or 4.4 percent, to $14.17 a bushel in Chicago, after rising by the exchange limit of 70 cents to $14.27, a 29-month high. Wheat futures for March delivery jumped 19 cents, or 2.5 percent, to $7.785 a bushel, after earlier gaining 4.1 percent.

Coffee rose for a third day in New York on speculation that unfavorable weather and crop diseases will disrupt global supplies. Arabica coffee for March delivery added 6.95 cents, or 3 percent, to $2.4155 a pound at 11:30 a.m. on ICE Futures U.S. in New York. The beans reached $2.4295. Robusta for March delivery climbed 2.7 percent to $2,166 a metric ton on NYSE Liffe at 4:32 p.m. in London.

To contact the reporters on this story: Steve Stroth in Chicago at sstroth@bloomberg.net; Alistair Holloway in London at aholloway1@bloomberg.net

To contact the editors responsible for this story: Steve Stroth at sstroth@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net

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