Grains rally on flood concerns, strong demand as gold fails to break $1,300 threshold

Friday, September 24, 2010

Grains rally on flood concerns, strong demand

Grain prices rallied Friday on worries that heavy flooding in the central United States could damage this fall’s harvest.

Corn for December delivery rose 22.5 cents to settle at $5.2175. Soybeans for November delivery rose 32.5 cents to $11.26 a bushel and December’s wheat contracts rose 22.75 cents to $7.20 a bushel.

The price increase showed traders haven’t backed off their belief that demand from China will keep supplies tight this year, even if the U.S. crop turns out to be near a record high, said Jason Ward, an analyst with Northstar Commodity.

Supply fears were heightened Thursday and Friday when a lingering storm system dumped almost a half-foot of rain on a swath of southern Minnesota and western Wisconsin, causing widespread flooding, Ward said.

“We don’t really have any (supply) cushion,” Ward said. “I’ve been getting calls all day yesterday and today about bean fields that are going to be zeroed out because of the water.”

Ward said grain prices are likely to rise as farmers assess the damage and demand remains strong to feed livestock in China and biofuels plants in the United States.

In other trading, Gold prices failed to close above the psychologically important threshold of $1,300, ending the week just shy of that benchmark. Gold rose $1.80 to settle at a record $1,298.10 an ounce.

Investors have been fueling the rally in gold by snapping up supplies as a hedge against inflation. Prices spiked after the Federal Reserve announced Tuesday it would consider taking additional steps to stimulate the economy, causing the value of the dollar to fall.

Other precious metals also rose. Silver December contracts gained 18.6 cents to settle at $21.399 an ounce and copper gained 2.75 cents to settle at $3.6180 a pound.

September palladium gained $3.65 to settle at $558.50. September platinum lost $6.10 to settle at $1,639.90 a pound.

In other trading, crude prices rose along with stocks on news that indicated an improving economy.

Benchmark oil for November delivery rose $1.31 to settle at $76.49 a barrel on the New York Mercantile Exchange.

In other Nymex trading in October contracts, heating oil rose 1.61 cents to $2.1306 a gallon, gasoline added 2.97 cents at $1.9471 a gallon and natural gas lost 13.8 cents at $3.881 per 1,000 cubic feet.

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