Commodities jumped to a 14-week high as crop conditions declined and prospects improved for raw-material demand in the U.S. and China, the world’s largest consumers of everything from corn and oil to pork and copper.
The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.2 percent to settle at 645.99 at 3:43 p.m. in New York, after reaching 648.91, the highest since April 3. Soybeans and corn climbed more than 1.4 percent, cocoa jumped 3.1 percent and copper increased 1.3 percent. The GSCI has risen 5.7 percent this month, almost erasing its loss for the year.
Hot weather in the U.S. Midwest eroded conditions in the past week of corn and soybean crops that the government predicted July 11 would be the biggest ever this year. Copper and nickel, down more than 13 percent this year before today as global growth slowed, rebounded on gains in U.S. manufacturing and bets that China will take steps to boost its economy. The dollar also has dropped from a three-year high on July 8, boosting the appeal of raw materials priced in the currency.
“The fact that a lot of commodities have already priced in stagnation may bode well,” Adam Klopfenstein, a senior market strategist at Archer Financial Inc. in Chicago, said in a telephone interview. “You’re not going to have the tremendous growth we saw in the past 10 years in commodities, but the skepticism may have gotten overdone, and there are individual commodities that are still worthwhile.”
About 66 percent of the U.S. corn crop, the world’s largest, was in good or excellent condition as of July 14, down from 68 percent a week earlier, the U.S. Department of Agriculture said yesterday. About 16 percent of plants reached the silking stage, critical for determining yields, compared with 35 percent on average the previous five years.
Output at U.S. factories, mines and utilities in June climbed 0.3 percent, the most in four months, a Federal Reserve report showed today. The 21st Century Business Herald reported that China’s cabinet may lay out economic plans tomorrow for the second half. The Asian nation is the world’s biggest user of industrial metals, followed by the U.S.
The Bloomberg U.S. Dollar Index, which tracks the performance of 10 currencies and rallied as much as 7.1 percent this year, has dropped 2.5 percent since reaching a three-year high on July 8. Sixteen of the 24 commodities tracked by the GSCI rose today.
Prices also gained after Federal Reserve Chairman Ben S. Bernanke last week called for continuing stimulus “for the foreseeable future,” bolstering prospects for low interest rates that fueled raw-material demand over the past five years.
“Investors recognize that the Fed will remain highly accommodative, even if their tactics change,” Scott Gardner, who helps manage $400 million at Verdmont Capital SA in Panama City, said in a telephone interview. “With modest inflation in the system, the Fed can rationalize a continuation of its pro-growth policies and the strength in oil prices also attracts people to the commodity sector.”