Were the opening ceremonies for the Beijing games the beginning of the end of the commodities rally? This graphic shows that China’s economic growth took off after the International Olympic Committee gave it the nod in 2001. The commodities boom, based on the Reuters/Jefferies CRB Index, can be traced back to around that time as well.

China went on an unprecedented seven-year construction spree to modernize its cities and infrastructure before throngs of athletes, tourists and media members arrived from around the world, stockpiling raw materials to accomplish its makeover.

Building the Olympic facilities and spiffing up Beijing for the cameras was only a drop in the bucket compared to overall growth in China’s economy, but consider that the spectacular National Stadium, known as the Bird’s Nest, required 45,000 tonnes of steel. Over that time, China became the number one consumer of metals and the number two buyer of oil behind the United States.

No one is expecting China to slam on the brakes when the Olympics end. But even a cooling from 10 percent growth a year to 8 percent should have negative consequences for commodity prices, given that demand from the United States and Europe is withering.

Gold’s oil-buying power is at its lowest in three years. (The chart shows the price of oil rising relative to the price of gold.) Hedge funds and other traders who play the gold/oil spread could be taking profits. Otherwise, this is hard to explain, since gold is considered a leading indicator of inflation.

In the past two weeks, crude oil prices rose to a record near $120 a barrel, while the spot price of gold fell from around $950 to $870 an ounce. Today an ounce of gold buys 7.65 barrels of oil. When gold was near $1,000 an ounce earlier this year, an ounce bought more than 10 barrels of oil. Gold’s weakest point relative to oil was in 2005 around 6 barrels.

Is the underperformance signalling that inflation expectations are overblown? Perhaps the Fed knows something … it cut a key interest rate another quarter percentage point on Wednesday and said it expected inflation to moderate in coming quarters, as energy and commodity prices level out. “I am still not getting why gold is trading down here and crude is up there. So something’s gotta give,” said Jonathan Jossen, an independent floor trader on the COMEX gold floor.

American farmers are chilling on planting corn, or at least Monday’s USDA data points to a backlash against the overplanting of corn in 2007. So does this mean the ethanol promise is beginning to fade?

Soybean futures dropped their exchange-set maximum at the Chicago Board of Trade on Monday after the Department of Agriculture released its widely anticipated report on prospective plantings by U.S. farmers.

Corn and soybeans are planted in the same areas of the Midwest and Upper Midwest and farmers systematically rotate between the two crops. Corn is planted first but requires more fertilizer and energy intensive field work. Now soybeans appear to be the flavor of the year.

Farmers want to plant almost 75 million acres of soybeans, used in mainly animal feed, cooking oil and the renewable fuel biodiesel, up from 64 million last year. They are shifting land out of corn. After blanketing the Midwest with 94 million acres of corn in 2007 — the most since 1944 — 2008 will see a slightly-less-smothering 86 million acres. The plans should lift corn prices, a CME panel predicted.

On reuters.com, track corn futures prices here
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