Commodities headed for the longest rally since February as the worst U.S. drought in more than half a century threatened crops and on speculation that monetary easing by central banks will boost demand for raw materials.
The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 1.6 percent to 649.93 at 11:10 a.m. in New York, after reaching 650.91, the highest since May 10. The gauge is up for the seventh session, the longest advance since Feb. 24. Soybeans jumped to a record, and wheat climbed to the highest in almost four years. Coffee, soybeans and cocoa led the rally.
Global equities rallied on speculation that governments will act to spur economic growth. Federal Reserve Chairman Ben S. Bernanke said on July 17 that policy makers are studying options for further easing. The European Central Bank reduced interest rates to a record low on July 5, and the Bank of England announced the resumption of bond purchases on the same day.
“The Bank of England, European Central Bank and probably the Federal Reserve are all going to engage in additional accommodation,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “That is a plus for commodities. We have an across- the-board better tone to the commodity board here, and of course there’s the big fear surrounding the grain markets.”
The GSCI index is up 0.8 percent this year. The MSCI All-Country World Index rose 5.2 percent, and Treasuries returned 2.7 percent, a Bank of America Corp. index showed. Grains helped lead the rally today as about 55 percent of the contiguous U.S. was in moderate to extreme drought at the end of June, the highest percentage since 1956, National Climatic Data Center figures show.
Soybean futures for November delivery rose 0.9 percent to $16.3525 a bushel on the Chicago Board of Trade, after reaching a record $16.7375. Corn futures surged as high as $7.99, just below the record $7.9925 set in 2008, while wheat jumped to the highest in almost four years.
“The biggest thing that’s giving us the lift here right now is the grain complex,” Sterling Smith, a commodity analyst at Citigroup Inc.’s institutional client group in Chicago, said in a telephone interview. “That is due to the U.S. drought. As long as the drought continues to slog on, we’re going to see prices continue to climb.”