Grains rally as USDA predicts smaller harvest than expected; gold and oil also rise

Grains rally on smaller harvest

Grain prices soared Friday after a government report showed this year’s corn harvest might be smaller than initially expected.

The U.S. Department of Agriculture report built on worries that grain and bean supplies will be tight this year, as farmers struggle to meet demand from the biofuels and livestock industries. The corn harvest will be 4 percent smaller than expected, while the soybean harvest will be 2 percent smaller.

Corn prices rose 30 cents to settle at $5.2825 a bushel. Soybeans for November delivery rose 70 cents to $11.35 a bushel. Wheat for December delivery rose 60 cents to settle at $7.1925 a bushel.

The USDA often revises its harvest estimates with several reports in October, but Friday’s report carried extra impact because it builds on longer-term worries that a corn supply pinch is in the offing, said Darin Newsom, senior analyst with Telvent DTN.

With overseas grain supplies down because of drought and other factors, the U.S. harvest is increasingly stretched by demand from ethanol factories and livestock producers, Newsom said.

Because of those deeper issues, Friday’s price won’t likely be the peak that corn reaches this year.

“The indication is that we’ll just continue to move up from now,” Newsom said. “There is literally nowhere else in the world to turn to fill these supplies.”

The USDA forecast that corn the U.S. corn harvest would be 12.7 billion bushels, down 4 percent from the September forecast and down 3 percent from last year’s record production of 13.1 billion bushels.

Soybean production is forecast at a record high 3.41 billion bushels, down 2 percent from September, but up 1 percent from last year.

Gold and other metals prices also rose Friday as jitters over the economy and currency values made precious metals an attractive hedge against inflation.

Gold for December delivery rose $10.30 to settle at $1,345.30 an ounce, near the record high of $1,347.70 it hit Wednesday. Silver prices also rose, with December silver gaining 52.1 cents to settle at $23.105 an ounce.

Other metals also rose. Copper rose 9.5 cents to $3.7745 a pound. October palladium rose 50 cents to settle at $587.60 an ounce and platinum gained $4.20 to settle at $1,704.20 a pound.

Oil and energy prices were also up.

The price of oil has been around $80 a barrel or more for over a week. Crude’s been rising as the dollar has weakened against the euro. Since oil is priced in dollars, it becomes more attractive to foreign investors as the dollar falls. Higher oil prices mean refiners have to pay more for crude to make gasoline and other refined products.

Benchmark crude for November delivery rose 99 cents to settle at $82.66 a barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil gained 3.01 cents to settle at $2.2819 a gallon, and gasoline rose 3.32 cents to settle at $2.1512 a gallon. Natural gas rose 3.4 cents to settle at $3.651 per 1,000 cubic feet.

(This version Corrects natural gas quote. For global distribution.)