Commodities Head for Longest Slump in Seven Months

Commodities capped the longest slump in seven months, paced by energy and agriculture, on signs of ample supplies of crude oil and grains amid increasing speculation that the Federal Reserve will scale back stimulus.

The Standard & Poor’s GSCI Spot Index of 24 raw materials declined 0.6 percent to settle at 606.77 at 3:42 p.m. New York time, the sixth straight decline and the longest skid since April 5. Earlier, the measure touched an 18-week low at 606.39. West Texas Intermediate crude was the cheapest in four months, and corn extended a slide to the lowest since August 2010.

The U.S. Institute for Supply Management’s gauge of service industries advanced more than forecast in October, increasing the odds that the Fed will taper monthly bond purchases. A government report tomorrow will probably show crude supplies rose for the seventh straight week after production climbed to a 24-year high. The corn crop was forecast to climb to an all-time high this year.

“The tapering worries seem to be slowly gripping the market,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “The supply situation is comfortable for many commodities, which is not great for prices.”

The GSCI index has dropped 6.2 percent this year, heading for the first decline since 2008. Corn has plunged 39 percent, silver and coffee tumbled 28 percent, and gold fell 22 percent.

The next big move in commodities probably will be lower because the rebound in global industrial production since the fourth quarter of 2011 is peaking, Credit Suisse AG said yesterday in a note.

Borrowing Costs

On Oct. 30, the Fed signaled diminishing concern over higher borrowing costs and cited “underlying strength” in the economy. That opens the possibility of lower debt purchases as soon as December, Citigroup Inc. and Barclays Plc said.

Today, WTI futures for December delivery on the New York Mercantile Exchange dropped as much 1.6 percent to $93.07 a barrel, the lowest since June 24.

On the Chicago Board of Trade, corn futures for December delivery fell as much as 0.5 percent to $4.24 a bushel, the lowest for a most-active contract since Aug. 26, 2010. The U.S. 2013 crop may reach a record 14.03 billion bushels, 1.3 percent more than the government estimated in September, according to a Bloomberg survey of analysts.

Soybeans in Chicago dropped to an 11-week low on speculation that a late U.S. harvest will allow farmers to collect bigger crops than the government forecast.

“Yields are better than had been expected,” Dennis Gartman, an economist based in Suffolk, Virginia, said in his daily Gartman Letter. “Corn and soybean crops will be manifestly larger this time than reported” two months ago by the Department of Agriculture, he said.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

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

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