U.S. corn and soybean futures rallied to 2-1/2-year highs Thursday as signs of tightening global supplies boosted prices for a second day, while demand concerns hit oil and metals prices.
The Reuters-Jefferies CRB Index, a global commodities benchmark, came just short of Wednesday's 27-month high before falling about half a per cent by the close.
The 19-commodity index is up about 2.8 per cent this week, after similar losses the week before.
A slump of more than 1 per cent in the dollar and follow-through buying after a supply/demand report issued by the U.S. Department of Agriculture on Wednesday lifted corn over 6 per cent, soybeans 5 per cent, and wheat 3 per cent in two sessions.
"USDA's numbers yesterday, in soybeans in particular, but also in the corn, were surprisingly bullish and presented an alarming supply situation that is now fueling these price gains," said Mario Balletto, analyst with Citigroup.
Wheat posted its strongest gains in a week on spillover support from corn and soybeans, after the U.S. government cut estimates for U.S. corn and soybean harvests, trimmed forecasts for drought-hit Argentine output, and sliced its wheat production view for flood-hit Australia.
While the CRB was pushed lower by a drop in oil and metal prices, the near 20 per cent weighting for soybeans, corn and wheat limited declines in the overall index.
A surge in last week's first-time filings of unemployment benefits pointed to headwinds for the U.S. economy, causing some investors to question the demand outlook for products using oil and industrial metals such as copper .
Oil prices slipped after a volatile session as investors weighed the effects of the U.S. jobs data, with the possibility that OPEC may raise output as prices flirted with the $100-a-barrel level.
"The jobless claims number was very disappointing and underscores the looming question of how long the diminished U.S. consumer can handle $3.00 plus per gallon gasoline. The answer would appear to be not for long," said John Kilduff, partner at Again Capital LLC in New York.
Brent crude rallied to near $99 a barrel earlier this week, raising concerns it could break above $100, which would drive up fuel costs and threaten the fragile economic recovery.
A delegate from a Gulf OPEC member state said the oil producer group will hold an emergency meeting only if crude bursts into triple digits and stays there.
ICE Brent crude for February settled down 6 cents at $98.06 a barrel.
Copper on the London Metal Exchange halted a two-day rally, also on concerns that U.S. demand may ease if economic growth fails to pick up and that top metals consumer China's Lunar New Year holiday is approaching.
Since hitting historic peaks at $9,754 per tonne in London last week, price momentum has stalled as macroeconomic uncertainties sparked demand worries over industrial metals.
"I think there is a little bit of disfavor with some of the metals because other markets (like corn) seem to have more going for them in terms of supply/demand," said Steve Platt, futures analyst with Archer Financial Services in Chicago.
Gold fell, snapping three sessions of gains, as safe-haven buying subsided when European bond sales went well and U.S. Federal Reserve Chairman Ben Bernanke presented a more positive economic outlook.
U.S. commodity markets will be closed on Monday for the Martin Luther King Jr. Day holiday. Trading resumes on Tuesday.