Even though there were strong finishes for gold and oil and several other commodities on Friday night, traders reported a rise in contract close outs after Bear Stearns was bailed out on Friday.
Dealers said that was a result of financial investors reducing their exposures, especially long positions, ahead of the weekend on fears the Bear Stearns problems might cause a knock on effect with other financial groups.
There was selling of positions and closing out of contracts in the more liquid markets, such as oil, soybeans and gold. Some traders were raising cash for margin calls.
Gold and oil though seem to be responding more to the weakness in the US dollar: copper and the metals more to traditional factors, such as stock levels in the London and Shanghai warehouses, while the likes of soybeans, wheat and corn seem to have been dominated by a combination of demand/supply factors and by liquidations by financial groups.
Traders quoted by Reuters said that a bigger culprit behind the market dive in Chicago in soybeans, wheat and corn on Friday was a fallout from the subprime mess.
Hedge funds were forced to liquidate positions in different financial arenas late last week to meet margin calls. That spilled over to the Chicago Board of Trade.
Corn closed down the 20-cent limit in all the contracts from May 2008 through July 2009 on Friday, but was off only 1.6%. Wheat and soybeans had bigger losses.
But the overwhelming trend for gold and oil was up. Gold finished the week at $US999.50 in New York after touching a new high of $1009 an ounce.
The US dollar fell to a record low against the euro and a 12-year low against the yen and will continue weakening this week ahead of the Fed’s meeting which is widely expected to cut rates by between half and one per cent.
That means commodity prices will edge higher.
Comex April gold rose 0.6% to $US999.50 an ounce, to be up 19% this year. It rose 2.6% last week.
May silver on Comex rose 1.2% to $US20.655 an ounce. The price has risen 38% this year.
Platinum and palladium though fell on speculation that a US recession will cut demand for the metals used in jewelry and pollution-control exhausts in cars.
Platinum had been supported by a power shortage in South Africa, but that now seems to have been sorted out with an agreement that mines will get 95% of their power needs for the next five years.
April Nymex platinum futures fell $US21.50, or 1%, to $US2,076 an ounce. The metal though rose 1.7% last week. Palladium futures for June delivery fell $US1.50 to $US514.40 an ounce. The metal finished 3.9% higher over the week.
Crude oil futures finished over $US110 a barrel, but off its highs on Friday.
Nymex April crude fell 12c to settle at $US110.21 a barrel. Futures prices touched $US111 a barrel on Thursday.
Oil rose 4.8% last week and is up 90% from a year ago.
In London April Brent crude rose 1c at $US107.55 a barrel.
Soybeans plunged on discernible selling by financial investors looking to cash out after the Bear Stearns bailout.
They fell by the daily maximum allowed by the Chicago Board of Trade. Investors sold commodities to raise cash as banks demand more money to back leveraged positions in stocks and bonds.
May soybean futures fell 50USc, or 3.6% to $US13.5275 a bushel in Chicago. Prices were off around 4% last week and more than 12% in the last fortnight.
The price rose to a record $US15.8625 on March 3. May soybean-oil futures fell 3.2% to 60.56 USc a pound. The commodity hit a record 72.69 USc on March 4.
Prices also fell on speculation US farmers will sow more of the oilseed than forecast because of poor planting conditions for corn. Corn has a longer growing season than some other crops and if planted too late in the spring, the grain pollinates during the heat of the summer, raising yield losses.
Bloomberg said leading American agri forecaster, Informa Economics has forecast that US farmers will lift soybean plantings 12% this year.
It says soybeans will be planted on 71.297 million acres, up from 63.63 million acres last year and 68.971 million acres in the company’s January estimates.
Wheat was another to fall sharply, plunging by the biggest amount in a month in Chicago on Friday.
It was part due to position liquidations, but more important were forecasts that US growers will lift wheat plantings this year for the same reason they will lift soybeans: higher prices.
Good rains across much of the wheat regions of the US Midwest also helped push prices lower.
May wheat futures fell 52.5USc, or 4.2%, to $US11.915 a bushel on the Chicago Board of Trade, the biggest drop since February 29.
Futures prices rose 16% from Monday through Wednesday on speculation of increased exports and lower US stocks (which happened in the latest USDA report). But they then fell sharply on forecasts of larger plantings in the US, Europe and perhaps Australia in the coming year.
Wheat futures though did finish the week up 7.8%. The price reached a record $US13.495 a bushel on February 27.
Informa Economics said it saw US wheat plantings rising 5.1% in the marketing year that starts on June 1.
US growers will lift plantings of spring wheat by around 4.4%, high protein durum-wheat by a large 21% (because of the very strong prices for high protein bread and pasta types of wheat) while winter-wheat acreage will rise 4.6% later this year.
The USDA produces an important report on planting intentions of US farmers on March 31.
