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With rain and flooding combining to surprise the northeast of the United States, the winter months are clearly descending fast upon the nation. Yet it's still five weeks to Thanksgiving. Last week traders and speculators increased their bets that the price of corn might rise by 64% to a net 85,882 contracts. In soybean futures and options contracts CFTC data showed a reversal in the holdings of large speculators who went from net short to net long to the tune of 36,384 contracts.

Over the past several weeks a frost warning has threatened the viability of both crops, while the latest threat is the return of rain, which would make it difficult for combine harvesters to harvest.

The Midwest is likely to see rain by today putting to an end a string of dry days allowing farmers to accelerate the harvesting process. By October 11, U.S. growers had collected 13% of corn and 23% of soybean crops. Inclement weather at this stage of the game is something of a heart-stopper.

Wet weather with the potential to reduce what had promised to be a bumper crop was enough to create a further surge in grain prices on Monday. Corn prices for December delivery surged 3.8% to 14.25 per bushel while the November soybean contract jumped 1.9% to 9.9625 per bushel.

The addition of further sizeable positions by large speculators, as indicated by the CFTC data, is behind last week's three-month high for corn and a six-week peak for beans.

Meanwhile wheat prices were led higher not by dour weather conditions at home but by the possibility of adverse conditions in Australia, which provides the fourth largest volume of exports of the crop. The eastern coast has suffered frosts while the western coast has been hot and dry - both likely to take a bite out of the overall crop.

The other factor impacting the behavior of grains on Monday was another sloppy performance by the dollar. As you are probably painfully aware, when the dollar goes up commodity prices usually go down. And because the precise opposite is happening day after day at the moment commodity prices are simply well bid. But the weaker the dollar gets, the more core demand there is for alternative assets, which is why investors are buying up commodities at the same time they are buying stocks and bonds. Wheat, corn and beans are all a store of value and not just foodstuffs.

December wheat prices surged 2.9% in Chicago as a result on Monday to stand at $5.1325 per bushel.

Rainfall has had a nasty impact on the price of sugar, which has so far doubled this year. Further woes on Monday saw its price reach a two-week high. Excessive rain in Brazil has hampered the harvest to such an extent that one major London-based broker predicts that on account of the problem's the world's largest cane growing region in Brazil may run out of exports before the end of 2009.

ICE-traded sugar on the London market rose 1.1% to 24.17 per pound to begin the week. Traders are extremely nervous in the sugar market after the contract reached a one-year high today and after last week's 13% jump for futures.

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