* Brent crude oil falls on economic, demand worries
* Grains slump on record U.S. harvest, surprising yields
* Gold settles near 11-month high; copper up for 4th day
* Arabica coffee at 10-week high, sugar hits 2-month peak
By Barani Krishnan
NEW YORK, Oct 2 (Reuters) - Oil and grain futures slumped
for a second day on Tuesday as a weak economic outlook pressured
energy prices and a record-fast U.S. harvest and
better-than-expected crop yields weighed on agricultural
markets.
The dollar's retreat from last week's three-week high,
limited to an extent the downside for commodities. Since raw
materials are mostly traded in dollars, a weakening of the
currency usually triggers upward adjustments in price.
Metals markets and soft commodities, such as arabica coffee
and raw sugar, bucked the trend in oil and grains.
The spot price of gold, edged higher, settling near
Monday's 11-month peak. Futures of the precious metal, traded in
New York, fell in light consolidation trade.
Copper crept higher for a fourth day of gains as the
dollar fell and funds bought in, although the market's upside
was capped by Europe's debt crisis.
"We really see no underlying reason behind their strength
other than possible spillover strength still coming in from
yesterday's session," Edward Meir, analyst at Intl FC Stone,
said in a commentary on copper futures.
Concerns over the euro zone heightened after Spain's Prime
Minister Mariano Rajoy denied a Reuters story quoting European
officials as saying that Madrid was ready to request a bailout
for its public finances as early as next weekend, but Germany
had signaled that it should hold off.
Rajoy said a request for European aid was not imminent. A
request for a bailout is viewed as positive for Spain and the
euro because it would trigger purchases of Spanish debt by the
European Central Bank that could lower Madrid's borrowing
costs.
Among soft commodities, arabica coffee soared nearly
4 percent to a 10-week high on Tuesday, on heavy short-covering
prompted by concerns of dry weather in top grower Brazil. Raw
sugar neared a two-month high.
Stocks on Wall Street were little changed amid uncertainty
about whether Spain will soon ask the euro zone for support and
worries that third-quarter U.S. earnings will disappoint.
The euro zone aside, investors are worried about slowing
global economic activity this year, which has curbed fuel demand
growth in Asia, Europe and the United States.
Global factory data released on Monday also showed euro zone
factories suffering their worst quarter since early 2009, and
No. 2 economy China losing steam.
Benchmark Brent crude oil, traded in London, settled
down 62 cents, or 0.6 percent, at $111.57 a barrel. U.S. crude
closed New York trade down 59 cents, or 0.6 percent at
$91.89.
The downside in oil has so far been limited by constraints
in production of Brent crude and the simmering dispute between
the West and Iran over Tehran's nuclear program.
"Economic data is bearish for oil and the immediate risk for
prices is to the downside," said Tamas Varga, an oil analyst at
brokers PVM Oil Associates in London.
"But geopolitics is supporting the market. It may be very
unlikely, but investors are still worried there could be a war
in the Middle East. And, as long as stories about Iranian
nuclear operations keep coming, those worries are not going to
go away."
On the agricultural front, soybean futures traded in
Chicago slid nearly 2 percent to a three-month low.
Corn futures were mixed as pressure from a rapid
harvest and spillover from lower soybeans was offset by thin
stocks and slightly improved demand after the recent drop in
prices.
Wheat fell for the sixth time in seven sessions on
forecasts for rain in the drought-parched U.S. Plains, which was
expected to boost winter wheat planting.
A two-year low in prices of palm oil in top producing
country Malaysia was also pressuring U.S. soybean oil and other
rival vegetable oils, analysts said.
"The extreme weakness in the Malaysian palm oil market is
casting a pall across oilseeds of all shapes and sizes. Combine
that with our (U.S. soybean) harvest moving along at a record
clip and it's not creating an environment that's bullish for
prices," said Sterling Smith, futures specialist with Citigroup.
"Fund managers are also still a little apprehensive about
where to buy as the technicals continue to break down. That
weakness is spreading into the corn and the wheat," he said.
Prices at 4:32 p.m. EDT (2032 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US crude 91.71 -0.77 -0.8% -7.2%
Brent crude 111.32 -0.87 -0.8% 3.7%
Natural gas 3.531 0.051 1.5% 18.1%
US gold 1775.60 -7.70 -0.4% 13.3%
Gold 1775.09 1.30 0.1% 13.5%
US Copper 380.10 1.55 0.4% 10.6%
LME Copper 8325.50 26.00 0.3% 9.5%
Dollar 79.737 -0.087 -0.1% -0.5%
US corn 759.75 -0.25 0.0% 17.5%
US soybeans 1533.25 -29.75 -1.9% 27.9%
US wheat 883.00 -13.00 -1.5% 35.3%
US Coffee 183.65 5.60 3.1% -19.5%
US Cocoa 2475.00 25.00 1.0% 17.4%
US Sugar 21.59 0.46 2.2% -7.1%
US silver 34.669 -0.283 -0.8% 24.2%
US platinum 1685.20 1.40 0.1% 20.0%
US palladium 654.20 8.60 1.3% -0.3%
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