Patricia Brown photo: While hiking along the trails in Nepal we came across these drying corn husks.
Soybean and corn futures jumped Wednesday, helping power a broad rally in commodities as both hit 30-month highs after the U.S. government forecast thin crop output this year.
Rallying agricultural commodities fueled concern about food inflation around the world. Oil and metals also rallied as a weak dollar boosted markets already surging on supply-demand fundamentals. In London, Brent crude oil neared $100 per barrel and copper , nickel and tin rose at least 2 per cent each.
The Reuters-Jefferies CRB index, a global benchmark for commodities, hit 27-month highs. The 19-commodity index has risen more than 3 per cent this week, erasing last week's 2.7 per cent loss, its biggest decline since November.
Soybean and corn futures jumped 4 per cent each, hitting the daily limit on the Chicago Board of Trade, after the U.S. Department of Agriculture estimated year-end crop stockpiles at below market expectations.
Wheat rose more than 3 per cent although USDA forecasts for the grain were nearer to trade estimates.
The CRB, which has a combined weighting of nearly 20 per cent to soybeans, corn and wheat, surged.
With agricultural commodities rallying, analysts said more consumers around the world may have to choose between boosting food spending or cutting consumption. This could cause mounting political tension.
"We are going to have to move to price levels high enough to slow down the demand," Don Roose, an analyst at U.S. Commodities in Iowa, said, reacting to the USDA forecasts.
The United Nations food agency said last week food prices hit a record high last month, providing an uncomfortable reminder of the 2008 global food crisis that sparked riots in countries from Egypt to Haiti.
The Group of 20 nations said last week it was finding ways to reduce food inflation, already at double-digits in Brazil, China and India.
U.S. crude oil futures rose about 1 per cent in New York to hover around $92 a barrel after a government inventory report showed crude oil stocks fell more than expected last week. In London, Brent crude rose above $98 per barrel, coming within striking distance of the $100 mark.
Copper on the London Metal Exchange rose more than 2 per cent to reach above $9,700 a tonne, near the Jan. 4 record high of $9,754. LME nickel jumped nearly 5 per cent to $25,880 a tonne, its highest since May.
U.S. cotton futures hit the daily 5-cent limit up at $1.5225 per lb, reacting partly to the USDA's slightly bullish forecasts for the crop this year. Arabica coffee rose over 2 per cent to reach 13-1/2 year highs above $2.44 a lb.
Meanwhile, gold rose to a one-week high Wednesday as the dollar fell sharply against the euro, but news that Europe could reach a comprehensive package in the next two months to solve the bloc's debt crisis put a damper on safe-haven demand.
Analysts said bullion could face strong resistance at its 50-day moving average near $1,383 an ounce. Gold has been largely rangebound after notching its biggest weekly loss in seven months last week due to a more positive U.S. economic outlook.