Grains Correct Lower, But Bull Market Support Remains Strong
Grain futures experienced some profit taking on Wednesday after reaching contract highs, but prices still ended well off session lows. According to Matt Bennett of AgMarket.Net, grains were due for a correction after rallying in August and becoming overbought.
'If the market's going to continue higher you've got to correct every once in a while,' Bennett said. 'You've got to sell something off.' He noted that some profits may have been taken, but many investors remain committed to the long-term bull market.
Despite the correction, grain prices still face significant support from fundamental factors such as low yields and tight global stocks. The August WASDE confirmed a 10.1% stocks-to-use ratio on corn, indicating a demand rationing rally. Bennett believes that confirmation of lower yields will be key to sustaining the bull market.
Other factors supporting grain prices include increased Chinese demand for U.S. soybeans and South American weather concerns due to El Nino. The Black Sea war between Ukraine and Russia has also contributed to higher prices. Bennett advises producers to 'reward the market' as it rallies, given that current prices are significantly higher than those seen in the past three to four years.