COMMODITIES

In thin trading on Monday the dollar index continued to fall, while equity indexes around the world continued to fresh peaks for 2009. And as they do investors continue to feel the need to hold fewer dollars. Instead they consider the prospect of earning a better rate of return by tapping into overseas markets. Investors also focus on the mammoth task the U.S. government has in working towards plugging a yawning budget deficit.

Both events mean only one thing - a weaker U.S. dollar. And as the public holiday unfolded on Monday, traders played that fact by continuing to weaken the dollar and pour money into the usual suspects: Foreign assets and commodities.

Gold rallied, orange juice rallied and grains rallied. Sure, each had its unique underlying reason, but each felt the full bias of traders looking for alternatives to holding onto the greenback as the euro inched towards $1.50 against the dollar.

Corn prices jumped 5.2% Monday while soybeans surged 3.6% while the price of wheat roared 5.6% courtesy of cold, wet weather that may delay harvests. Traders boosted wheat prices in the belief that next year will see less planting of this crop thanks to delays in corn and bean harvesting. If those face a shortfall, wheat farmers next year may be less inclined to repeat planting of the less profitable wheat crop.

Corn prices jumped after reports of a forthcoming weekend freeze that might harm crops already ripened, yet farmers face increasing difficulties getting to the crops on account of wet conditions. Record cold temperatures over the weekend also devastated some less mature crops.

Last week the U.S. Department of Agriculture shocked orange juice traders by predicting that this year's harvest will fall far-short of the previously anticipated 151.2 million boxes. USDA says that the crop will likely produce 136 million boxes. The weaker tone to the dollar helped nudge the price of frozen concentrated orange juice up 3.5% to $1.124 per pound.

The price of gold reached just $2.00 short of its record set last Thursday and the December contract closed at $1,057.70 an ounce. Silver also rose. Crude oil prices also rose as optimism spread that the global recovery would spread its wings.

That was just the start of the week, and with little in sight to seemingly arrest the dollar's decline and with commodity prices bursting out in all directions we really could be setting up for an eventful several days ahead. 

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