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Fund bvuying sends commodities higher

CHICAGO: Broad-based speculative buying sent commodity markets from cotton to crude oil sharply higher Monday in active trading.

"You name it. Hogs, grains, cotton, silver and crude oil are up, nearly everything turned up today," said Ron Kucha of O'Connor and Co.

The widespread rallies boosted a closely-watched barometer of commodities performance, the Knight-Ridder Commodity Research Bureau Index of Commodity Futures, to its highest level in nearly five years. The index rose 2.59 points to 239.92.

The speculative demand for the variety of products had a good degree of fundamental as well as technical backing.

Crude oil and product futures on New York's Mercantile Exchange (NYMEX) ended higher.

"October crude could go higher, but I'm concened about how much the latest leg of this rally may be based on the tension surrounding Iraq which I think will turn out to be overdone," Lehman Brothers analyst Morris Greenberg said.

Iraqi defector Lt. Gen. Hussein Kamel Hassan, the son-in-law of President Saddam's Hussein who headed a secret military programme, over the weekend claimed Iraq was about to invade Kuwit and Saudi Arabia. That helped fuel bullish fervor that remained alive from last week's news of U.S. military exercises in the Mideast.

NYMEX September crude ended up 38 cents at $18.25 a barrel and September gasoline closed up 0.23 cent at 54.46 cents. September heating oil gained 0.59 cent to 50.29 cents.

Concerns about tight supplies sent silver prices soaring.

Silver futures on New York's Commodity Exchange (COMEX) ended near 3-1/2 month highs, and the September contract closed up 9.5 cents at $5.792 an ounce.

COMEX warehouse data released after the close showed that silver stocks have fallen by more than 25 million ounces in the last three days.

Cotton futures on the New York Cotton Exchange (NYCE) ended locked up the 2-cent limit for the third consecutive day on concerns about pest infestations in the U.S. crop.

"There continues to be fear of insect damage in major producing states," Prudential Securities analyst Ernest Simon said. "I think it is exaggerated, but there was continued short covering."

Most active December closed at 80.55 cents a pound. Cotton Tuesday will trade with expanded 3-cent-per-pound limits.

Chicago Board of Trade soybeans climbed on concern about possible heat damage to the crop this week. CBOT soybeans ended 5-1/2 to 9-3/4 cents per bushel higher, with August up 8-1/2 cents at $6.02-1/2.

Hot weather and concern about the gray leaf spot disease in the corn crop boosted that CBOT futures market 2-3/4 to 5-1/4 cents higher with September ending up 4-1/4 at $2.86 a bushel.

Wheat futures also climbed on fund purchases of at least 18 million bushels. CBOT wheat futures closed 3-1/2 to 7 cents per bushel higher, with September up 5-1/2 at $4.34.

New contract highs were set in Chicago Mercantile Exchange live hog futures with surging cash hog markets and strong packer demand leading the rally. CME live hogs ended as much as 1 cent higher with August up 0.975 cent at 51.325 cents a pound.-Reuter