Grain futures - Weekly review: October 10-14

Forexpros – Corn and wheat futures edged higher on Friday, while soybean prices rallied to a three-week high as increased demand from top consumer China and a broadly weaker U.S. dollar boosted the appeal of commodities.

On the Chicago Mercantile Exchange, corn futures for December delivery traded at USD6.3988 per bushel by close of trade on Friday, jumping 6.33% over the week. It was the second consecutive weekly gain and the biggest since the week ended July 15.

The U.S. Department of Agriculture on Thursday confirmed the sale of approximately 900,000 tonnes of U.S. corn to China, the second largest single-day sale of U.S. corn supplies to China on record.

Speculation over the large sale saw corn prices rally nearly 6.5% on Tuesday after Chinese media outlets reported that the country had purchased 1.5 million tonnes of corn, without disclosing the supplier.
 
The U.S. is both the world's largest corn producing nation and the world's largest exporter of the grain, while China is the world’s second largest corn consumer.

Wall Street bank Citigroup said in a report Friday that the “significant Chinese purchase is designed to build up a little bit of their reserves after clearing out old inventories as they plan to do again in November."

Elsewhere on the CMEX, wheat for December delivery rose 2.56% over the week to settle at USD6.2362 a bushel on Friday, the first weekly gain in seven.

Wheat prices tracked sharp gains in corn on Tuesday, rallying nearly 8% amid expectations deteriorating crop conditions in China will lead the country to increase imports of wheat. China is the world’s largest wheat producer and consumer, while the U.S. is the world’s third largest wheat producer and biggest exporter of the grain.
 
However, prices trimmed gains on Wednesday after the USDA raised its estimate on world wheat supplies in the 2011-12 marketing season to 202.37 million tonnes, up nearly 8 million tonnes from the previous month’s forecast.

Meanwhile, soybeans for November delivery surged 8.6% on the week to settle at USD12.6862 a bushel, the highest price since September 27. It was the first weekly gain in five weeks and the largest since December 2008.

Soybean prices were boosted after official trade data from China showed that the nation’s soybean imports rose 4% from a year earlier to a record 52.3 million metric tons in the year ended September 30. 

China is the world’s largest soybean consumer and is expected to account for nearly 60% of global trade of the grain in the 2011-12 season, according to the USDA.

Grain prices found further support Friday as hopes for a resolution to the ongoing debt crisis in the euro zone and better-than-expected U.S. retail sales saw risk appetite sharpen, boosting riskier assets and dampening the appeal of traditional safe haven assets like the U.S. dollar.

A weaker dollar boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.

Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.

In the week ahead, any signs that European Union leaders are making progress on steps to contain the debt crisis in the euro zone look likely to continue to support risk appetite.

Meanwhile, investors will be looking towards a string of economic data from the U.S. and China to gauge the strength of the global economy.