Indiana Grain Company, LLC

Posted: 07/02/09

By: tomgrisafi

Commodity prices have been tumbling of late amid a flood of bearish economic data, including an unexpected drop in consumer confidence.

Prices for gold, copper and oil were all lower after a private research group said consumer confidence fell in June. The decline contrasted sharply with the big jumps in the Conference Board's measure of consumer sentiment in April and May.

Consumer sentiment is a closely watched monitor since consumer spending comprises more than two-thirds of economic activity. If consumers are worried about the economy, they will keep their wallets tight, which hurts demand for basic materials.

Grain prices, meanwhile, were hit hard by a government report showing a big increase in expected production.

A stronger dollar did little to stoke commodities buying. The dollar moved higher against the euro and the British pound Tuesday after the British government said the U.K. economy shrank in the first quarter by more than originally reported, the worst drop in half a century.

The dollar also benefited from a flight to safety as investors moved out of stocks, commodities and other risky assets following the disappointing consumer confidence data.

Commodities tend to benefit when the dollar is weak, as it makes them cheaper for foreign investors.

This week, however, at the Chicago Board of Trade, corn prices took a beating after the U.S. Department of Agriculture said farmers planted 87 million acres of corn, whic was more than analysts expected and the second largest corn acreage in more than 60 years.

Source: Bloomberg, AP