COMMODITIES-Grains, oil lead CRB to 11th day of losses, longest streak ever

NEW YORK, July 11 Fri Jul 11, 2014 5:26pm EDT

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NEW YORK, July 11 (Reuters) - Commodity prices from cotton to corn to crude tumbled on Friday, driving a key index to its longest-ever losing streak as supply-side fundamentals grew brighter.

The rout came a day after news of strain at Portugal's largest listed bank upset other financial markets with fears of financial contagion in Europe. But commodity investors focused more on fundamentals than on macroeconomic risks.

Soybean prices slid more than 2 percent and wheat slumped 4 percent after the U.S. government said a bumper crop would make next year's ending stocks even higher than expected. Most major crops are now trading at their lowest in at least 2-1/2 years, after sliding as much as 30 percent since May.

Oil posted its third straight weekly loss, pushing Brent crude to its lowest price in three months as investors grew less worried about supplies in Iraq and Libya.

The 19-commodity Thomson Reuters/Core Commodity CRB Index fell by 0.9 percent, its 11th consecutive daily decline, the longest losing streak in data going back to 1994. The index has fallen 5 percent since reaching a near two-year high in June. Gold ended little changed.

Investor sentiment toward commodities showed signs of improving this year as raw material prices staged a come-back in the first half, outperforming other markets such as equities. But the slump in recent weeks could change that.

"There has been a sudden shift in the sentiment of investors in the past six to eight weeks," said Adam Sarhan, chief executive of New York-based financial advisory and boutique investment firm Sarhan Capital.

As supply concerns diminished and slow economic growth in the United States and Europe squeezed demand expectations, investors have shifted capital out of commodities and back into equities.

Total outflows from commodity exchange-traded funds topped $800 million in the first half, according to data from asset manager BlackRock.

GRAINS GO TO SEED

Grain prices dove after the U.S. Department of Agriculture projected that stockpiles at the end of next summer would be even bigger than expected. Traders said supplies could get larger still given ideal growing conditions, not yet factored into the USDA's forecasts.

"Leaving the yields unchanged tells you that this can get more bearish if weather is favorable," said Don Roose of U.S. Commodities.

In its monthly report, the USDA raised its forecast for the U.S. soybean harvest by 4.5 percent to a record 3.8 billion bushels, topping analysts' expectations by 0.7 percent.

Cotton prices plunged to two-year lows, their third straight week of losses as a bearish U.S. government crop report reinforced concerns about growing supplies, triggering a new pullback of institutional cash.

OIL BECALMED

Brent oil hit a three-month low on Friday, as investors grew less fearful about supply shortages.

The North Sea benchmark fell $2.01 on the day, and was down about 3.7 percent from the beginning of the week to settle at $106.66 a barrel, its lowest settlement since April 7.

"We continue to see some liquidation selling in the market," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. "But there is still uncertainty surrounding Iraq, and that means the market should find some support."

In June, oil prices hit a nine-month high as a Sunni Islamist insurgency swept northwestern Iraq, fueling concerns over supply disruptions from OPEC's No. 2 producer.

Oil prices slid over the last month, as violence in northern Iraq has spared southern refineries and as Libya was set to ramp up oil production.

Meanwhile, Kurdish peshmerga forces took over production facilities at two northern Iraqi oilfields, Bai Hassan and Kirkuk, replacing Arab workers with Kurdish personnel.

"If those supplies can flow, the market may be moving from relative tightness to relative oversupply," said John Kilduff, partner at Again Capital LLC in New York. (Reporting by Jonathan Leff and Lorenzo Ligato; Editing by David Gregorio)

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