Commodities prices fell last week as the credit markets turmoil hit energy and base metals, forcing hedge funds and other speculators to liquidate their positions.
The fears, especially in Europe, of a credit freeze, which brought two days of unprecedented central bank intervention, forced many leveraged investors to clear their position and go to cash.
The worries overrode still bullish projections of higher commodity prices in the medium term because of the continuing boom in China and India.
However, many investors and analysts in the US wonder if the looming slow-down in the US economy will procure an oversupply of industrial metals and energy products that will force prices down in the short term.
But the commodities picture remains mixed: the prices of many agricultural products (with the exception of sugar and cotton) are strong for supply and demand reasons in the US, Europe, Australia and across Asia.
Wheat hit a series of new 11-year highs in US trading, other grains and oil seeds were a little weaker because of seasonal demand issues, while cotton prices fell to six week lows, and sugar prices had their biggest weekly fall in three months on signs India may be boosting exports.
The New York futures price ended around 9.54 USc/lb, down around a cent over the past month or so. It fell 7% last week alone.
Copper, nickel, lead, zinc, tin and aluminium all battled last week to remain positive but were bombed Thursday and Friday by the great credit scare.
Nickel has been the biggest loser in recent months as the record prices of more than $US54,000 a tonne drove away users, forcing many to cut their consumption of the metal or abandon it completely.
Nickel ended more than 50% under its all-time high Friday on the LME at almost $US26,700 a tonne. That sort of price drop will have left quite a few users with stock losses.
Copper, lead and zinc, the three other metals where there has been enormous speculative action, all weakened and look like being driven more by US demand concerns than China, which is overheating in an uncomfortable way.
Base metal prices suffered particularly as traders anticipated that a weak US housing market would translate into lower demand. Prices were also pushed down because of rises in London Metal Exchange warehouse inventories.
LME copper lost 2.9% per cent last week to $US7,450 a tonne; LME aluminium shed 2.9% in value to $US2,594 a tonne and lead, the best performing metal in 2007, lost 1.3% per cent to $15,800 a tonne.
Nickel fell 9% to $US26,750 a tonne and tin, after surging during the week to a record $US17,050 a tonne, ended with a 1.2% loss to $US15,800 a tonne.
Except for nickel, these are still solid prices and very profitable for mining companies here and around the world.
But the volatility will raise concern among buyers and some sellers who may have been dealing at prices above these levels. Should prices continue to fall, especially for copper, lead, zinc and tin, some buyers might walk from contracts
Meanwhile, wheat in Chicago hit a record $US7.01 a bushel before retreating to end the week at $US6.84 a bushel.
Crude oil prices in the US and Europe fell 6.5%, their lowest levels in five weeks, with Brent, the European benchmark, dropping below $US70 a level at one point late in the week, on the ICE in London.
The current US market crude contract, Nymex September West Texas Intermediate, fell 3.5% on the week after dropping 12 US cents to $US71.47 a barrel on Friday.
ICE September Brent ended 18 US cents higher at $US70.39 a barrel on Friday and fell 4% over the week on those fears about US demand slowing and financial investors existing speculative positions.
The International Energy Agency has cut its forecast for fourth-quarter US oil demand due to fears the housing slump and credit market problems will slow the economy for the rest of the year.
America is the world's biggest oil consumer and analysts note there has been a surprise three-week fall in petrol consumption right at the end of the peak summer driving season.
Prices have also fallen, so it's not a price-related problem. The Agency cut fourth-quarter oil demand in North America by 100,000 barrels a day to 25.88 million.
The global demand figure was little changed at 88.05 million barrels a day because of the strength of demand from Asia.
Gold and silver rose in New York on Friday after big losses the day before.
December Comex gold ended $US8.80 up $US681.60 an ounce for a loss of 0.4% over the week (it fell 2% on Thursday).
September silver futures added 16.5 US cents to $US12.87 an ounce.
