An employeee at the BHP Billiton copper mine at Escondida works amid sheets of copper.
A rebounding dollar Thursday was a speedbump for a commodities rally that earlier sent copper to a record high and lifted some agricultural and energy prices to their highest since the 2008 financial crisis, keeping inflation fears on the front burner.
Copper rose above $10,000 (U.S.) a tonne for the first time in London overnight, before easing. London's Brent oil dipped too after rising to a 28-month high above $103 a barrel on the back of the unrest in Egypt.
Sugar dived on profit-taking after spiking to 30-year tops on Wednesday as a killer cyclone battered Australia's sugar cane fields. Wheat closed down but not far from the 2008 highs seen in the last session after a snowstorm that paralyzed the U.S. grains belt.
The Food and Agriculture Organisation's closely-watched Food Price Index hit record highs in January after rising for a seventh month in a row.
"The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come," FAO economist and grains expert Abdolreza Abbassian said in a statement.
Such worries about inflation helped gold to its first major gain in a week as investors piled into exchange-traded funds of the precious metal as a hedge against rising food prices and geopolitical risks.
Food prices were last in the spotlight before the financial crisis. This time, they helped fuel the discontent that toppled Tunisia's president in January and have been a factor in the uprising this month against Egyptian leader Hosni Mubarak.
As fears grew that such unrest could spread to other Arab countries, food prices have also risen on expectations that governments in the region would stock up on more grains to reassure their populations.
Despite the bullish outlook for commodities, not all were convinced that the sector was a one-way trade from here. The dollar's rebound, after surprisingly strong growth in the U.S. services sector, showed a resilient economy could also work negatively for commodity prices.
Investors will be looking out for U.S. December jobs data on Friday to see if economic growth was keeping pace with the recent highs in commodities.
"We all know everyone is shorting the dollar, buying gold, and buying food commodities. So it makes sense that all these crowded plays are about to see a major shift," said Chris Vermeulen, a financial markets commentator.
Charles Kernot at Evolution Securities agreed.
"When any traded instrument reaches a psychological level, a nice big round number, it creates a little bit of downside risk," said the analyst. "At some stage, we're going to have interest rates going up because of high and increasing rates of inflation. And from that perspective, it's going to become more costly to stay long of commodities."
Weekly export sales of U.S. wheat disappointed bulls in grains market who had expected a surge in buying after all the fears about food hoarding triggered by Egypt's crisis.
The U.S. Department of Agriculture said 565,400 tonnes of U.S. wheat were sold for export last week, below estimates for 800,000 to 1.1 million tonnes.
Wheat on the Chicago Board of Trade March ended down half per cent at nearly $8.60 per bushel.
Among metals, copper took out the $10,000-per-tonne level market bulls had eyed for weeks before falling back on the strength of the dollar. London Metal Exchange copper finished a touch lower, or $15, at $9,930 a tonne.
In oil , Brent crude settled down just over half per cent at below $102 a barrel. Early in the session, it shot above $103, its highest since Sept. 26, 2008.
In sugar, the raw-grade variety traded in New Yorkplunged almost 10 per cent to settle above 32 cents a lb after soaring to a 30-year high above 36 cents a lb on Wednesday. Coffee , meanwhile, hit a 13-1/2 year peak.