Grains bounce back Wednesday
U.S. grain and soybean futures rallied Wednesday, recouping some of the sharp losses incurred in the past two days, amid views that the market was oversold.
Corn, wheat and soy futures all climbed around 2%, as grain buyers and speculators moved in take advantage of what some perceived as bargain prices.
"The drop in prices uncovered fresh demand," said John Kleist, an analyst with brokerage ebottrading.com in McHenry, Ill.
A 9% drop in soybean futures in the past two weeks triggered buying from domestic soy processors and importers, Mr. Kleist said.
Some traders also bid up prices based on technical decisions, after soybeans fell to a one-month low and corn slid to a two-month low.
Losses earlier this week were driven by a seasonal rise in corn and soybean supplies as the pace of the U.S. harvest advanced. Also, some large funds exited their bullish bets after corn and soybeans jumped to record highs this summer, propelled by the worst U.S. drought in decades.
"It's not a big surprise for the markets to have a minor recovery after experiencing a sharp setback so quickly," said Chad Henderson, president of advisory firm Prime Ag Consultants in Brookfield, Wis.
Rallies in the grain and soy markets are likely to be limited by the ongoing harvests of corn and soybeans. About 26% of the U.S. corn crop and 15% of the soybean crop had been harvested through Sunday, according to U.S. Department of Agriculture estimates.
The Kaohsiung branch of Taiwan's Breakfast Soybean Procurement Association announced a tender for a 40,000-60,000 metric ton soybean cargo from the U.S. or South America on Wednesday.
Earlier this month, the association didn't make any purchases in a tender, because prices were too high. The latest decline in prices this week on CBOT has revived buying interest among importers in East Asia.
Soybeans priced at $16 a bushel are still high, but the price looks a lot more attractive than buying soybeans at $18, ebottrading.com's Mr. Kleist said.
"There are still no signs of soybean demand destruction, and this [decline in prices] has only aided importers and end users," analysts at advisory firm AgResource Co. wrote in a midday market note Wednesday.
Traders said there are reports of China purchasing a few cargoes of U.S. soybeans due to the price drop, and South Korea buying 110,000 metric tons of soymeal, AgResource added.