NEW YORK/LONDON -- U.S. milk futures hit record highs Wednesday while wheat prices saw an 11-year peak amid signs of a global rise soon in interest rates that analysts said may curb investor appetite for commodities.
In other markets, copper and oil recovered from a sharp sell-off in the previous session. Gold closed lower.
Worries of higher interest rates in Australia, China and Britain — following rate hikes last week in Europe and New Zealand — were hurting investor sentiment in most markets and analysts said these could cross to commodities, hitting industrial metals in particular.
Yields on benchmark 10-year U.S. Treasury notes hit a five-year high of 5.33 percent, surpassing the Federal Reserve's benchmark rate of 5.25 percent.
"As bond yields rise, borrowing costs go up and the return on more risky assets like equities and commodities decreases compared to interest rates," said Andrew Harrington, an analyst at Australia and New Zealand Bank.
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"This is not risk aversion, it is 'risk choicing,' and if analysts think those interest rates will slow growth, they are likely to hurt demand for industrial metals," Harrington said.
Milk futures on the Chicago Mercantile Exchange closed with double-digit gains for most months for the third straight day, with July setting a record high of $21.75 per cwt, in reaction to higher cash cheese prices and strong demand for other dairy products.
For U.S. consumers, the higher wholesale prices meant higher store prices this summer for milk, cheese, and other dairy products, analysts said.
That would translate to higher inflation, inviting higher interest rates, they added.
"This is going to cause the consumer price index for July and August to spike," said Mary Keough Ledman, an economist with Keough Ledman Associates.
WHEAT AT 11-YEAR HIGH
July wheat on the Chicago Board of Trade closed up 24-1/2 cents at $5.89-1/2 per bushel, hitting an 11-year high, on worries about the size of the hard red winter wheat crop and harvest delays.
The surge in wheat also drove CBOT corn up 3 percent, with the July hitting a 2-1/2 month higher and closing up 11 cents at $4.04-1/2 per bushel.
U.S. copper futures reversed earlier losses to close slightly higher as traders in the red metal took their cue from a rebound in global equities and stabilizing precious metals.
Copper for July delivery settled up 2.60 cents to $3.3130 a lb on the New York Mercantile Exchange's COMEX division, recovering from a 2-1/2-week low at $3.21 in electronic trading and climbing as high as $3.3230.
Gold futures ended modestly lower, as concerns about rising interest rates interrupted an earlier advance.
COMEX's most-active gold futures for August settled down 40 cents at $652.70 an ounce, after moving in a range between $656.20 and $649.30.
Oil vaulted more than a dollar a barrel on Wednesday after a U.S. government report showed gasoline stockpiles remaining well below normal at the start of the summer driving season.
London's Brent crude, now more representative of the global market than U.S. oil, was up $1.15 to $69.94 a barrel, reversing an earlier drop. U.S. crude rose 91 cents to $66.26.
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