Grain prices rally ahead of February crop report

(AP) — Grain prices rallied Monday, a day ahead of a key crop report from the Department of Agriculture.

John Sanow, an analyst with Telvent DTN in Omaha, Neb. said most of the gains in wheat, soybeans and corn were due to short-covering. Short sales occur when a trader bets an investment will drop in price.

Grains have done just that over the past month. Prices have steadily dropped since the USDA said Jan. 12 that grains supplies are plentiful. If Tuesday's crop report shows supplies unexpectedly shrank, it would drive up prices and erase gains for investors who shorted the market.

Shorting occurs when a trader borrows a contract and immediately sells it, while promising to buy the same contract back later — hopefully at a lower price. If the price does fall, the trader buys the contract back at the cheaper price and returns it, pocketing the difference.

Investors bought back contracts throughout the day to avoid the risk of being caught with short positions if prices jump after the crop report comes out.

Wheat for March delivery rose 10.75 cents, or 2.3 percent, to settle at $4.84 a bushel. Soybeans rose 16 cents to $9.295 a bushel, while corn rose 4.5 cents to $3.56 a bushel.

Sanow said the USDA is expected to say U.S. supplies of the grains fell modestly last month, but global supplies continue to grow. Short-sellers would likely get hammered if supply estimates come in below expectations.

Elsewhere, metals prices rose modestly as the dollar weakened, while energy prices rose as another winter storm approached the East coast.

Commodities prices often rise as the dollar falls because it makes dollar-denominated commodities cheaper for foreign investors. The ICE Futures US dollar index fell 0.2 percent.

April gold rose $13.40 to settle at $1,066.20 an ounce. Silver for March delivery rose 25.5 cents to $15.085 an ounce, while March copper gained 5.55 cents to settle at $2.913 a pound.

Energy prices got a lift as more cold weather was forecast for the Mid-Atlantic region.

The area could be facing another snowstorm as it continues to dig out from nearly three feet of snow. The region is one of the heaviest users of heating oil in the U.S.

Heating oil for March delivery rose 1.07 cents to settle at $1.8855 a gallon on the New York Mercantile Exchange. Benchmark crude for March delivery added 70 cents at $71.89 a barrel.

In other Nymex trading in March contracts, gasoline rose less than a penny to settle at $1.894 a gallon. Natural gas gave up 11.4 cents to settle at $5.401 per 1,000 cubic feet.