COMMODITIES-Soy, cocoa and gas lead rally; oil down

Thu Oct 18, 2012 5:21pm EDT

* Soy jumps as farmers slow to sell amid waning harvest

* Cocoa leaps on less grindings

* Natural gas biggest winner of the day, defying weather

* Oil, metals down as dollar rebounds, Wall Street slips

By Barani Krishnan

NEW YORK, Oct 18 (Reuters) - U.S. soybean prices rose on Thursday for a third straight day as farmers were slow to sell amid a waning harvest for the crop and cocoa rebounded on less grinding of the commodity that is used for confections and beverages.

Natural gas also rallied as investors remained upbeat about the market, despite milder autumn weather in the U.S. northeast, where gas is one of the main fuels used for heating.

Oil, gold and copper closed lower as the dollar strengthened and stocks on Wall Street slipped on weaker-than-expected quarterly results at some U.S. companies.

Cotton fell, too, after outperforming other commodities in U.S. trading over the past two days due to concerns over the quality of the fiber delivered to the domestic market.

The 19-commodity Thomson Reuters-Jefferies CRB index ended modestly higher after the mixed performance in the markets it tracks. Natural gas led gains, with a rise of 3.4 percent.

SOY IN FOR OCT'S BIGGEST WEEKLY GAIN

Soybean futures soared 2.4 percent in Chicago trading, posting their biggest one-day advance in a month. The market has gained more than 1 percent on the week, heading for its first weekly advance since early September, after setting a 3-1/2-month low in prices just a few days ago.

Traders attributed the run-up to strong cash prices for soybeans in the physical market and farmers' reluctance to sell down as harvest for the 2012 U.S. crop wanes.

"The harvest is very much wrapping up and producers are closing the bin doors. They've stopped selling," said Jason Roose, a co-owner and market specialist for U.S. Commodities in Des Moines, Iowa.

"This post-harvest rally will probably continue for the next two to three weeks, maybe gaining 40 cents to 60 cents from the lows we hit on Monday," he said.

The front-month contract for soybeans settled at $15.45-1/2 a bushel, up 36-1/4 cents. It was poised to close the week up 1.5 percent.

Just on Monday, soybeans plunged to a 3-1/2-month low of $14.85-1/2, down 17 percent, or $3 per bushel from the record high of nearly $18 per bushel set in early September.

"The market was very over sold from a technical standpoint," Roose said.

Other agricultural markets in Chicago also rose strongly in Thursday's session, with corn up 2 percent and wheat gaining 1.4 percent.

COCOA "UNDERVALUED"

Cocoa futures rose ahead of the North American third-quarter grind data, which fell 2 percent from the previous three months.

Cocoa has begun to recover after falling more than $300 from peaks set in early September on concerns about weak demand and improvements in the outlook for the West African crop.

"We anticipate funds moving back to net buyers in the market as cocoa prices look undervalued relative to the risk of the coming harvest season," Rabobank said in a market note.

"If early West African arrival data suggests lower-than-expected crops or lack of farmer selling, it will likely act as the bullish catalyst to bring funds back in," the report added.

U.S. cocoa futures' most-active contract, December, settled up $53, or 2.2 percent, at $2,438 per tonne.