Commodities Slump as G-8 Says Oil, Food Prices Pose `Challenge'

Commodities tumbled for a third day, led by crude oil and corn, as Group of Eight leaders said rising energy and food costs pose a ``serious challenge'' to the global economy.

The UBS Bloomberg Constant Maturity Commodity Index has dropped 4.2 percent in three sessions, led by slumping agricultural prices. Corn has plunged as warm weather in the U.S. Midwest improved crop conditions following floods last month in states including Iowa and Indiana. Crude oil has slumped 6.1 percent in two days.

Commodities are falling after their best first half in 35 years. Record prices for fuel, soybeans, wheat, copper and other raw materials are leading oil explorers, metal producers and farmers to increase supplies. Oil has dropped 6.6 percent from its record, and corn has declined almost 10 percent from the all-time high.

``We have peaked for oil for now,'' Polar Pacific Capital Managing Director David Bensimon said yesterday in an interview in Singapore. ``With agricultural commodities facing their own vulnerability, all of this will take the shine off commodities.''

The weighted UBS Bloomberg index dropped 34.62, or 2.1 percent, to 1,641.62 at 10:22 a.m. New York time. Yesterday, the gauge, which measures 26 futures prices, fell 2.2 percent, the most since May 29.

The Reuters/Jefferies CRB Index of 19 raw materials fell 5.32, or 1.2 percent, to 453.72. Yesterday, the gauge tumbled 2.8 percent, the most since March.

Surging energy costs have rippled through the global economy by sapping household budgets and boosting production costs. The World Bank has warned that 33 countries from Mexico to Yemen faced social unrest, partly because of higher food prices.

`Risks Persist'

``We have strong concerns about the sharp rise in oil prices,'' the Group of Eight said in a statement today in Toyako, Japan, where the leaders are holding their annual summit. ``The world economy is now facing uncertainty and downside risks persist.''

Crude-oil futures for August delivery fell $5.12, or 3.6 percent, to $136.25 a barrel on the New York Mercantile Exchange. Before today, the price almost doubled in the past 12 months, reaching a record $145.85 on July 3.

Corn futures for December delivery fell 27 cents, or 3.6 percent, to $7.20 a bushel overnight on the Chicago Board of Trade. The price still has doubled in the past 12 months, reaching a record $7.9925 on June 27.

``All the bad economic news is making people take a second look at commodities,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``Commodities were purchased as a hedge against inflation. A global recession is looking more likely, and it's the greatest weapon in the fight against inflation