U.S. corn futures slumped to three-year lows on Wednesday, with soybeans and wheat following suit, halting rallies from the previous session.
Supply Glut Dampens Market Sentiment
Market analysts pointed to ample domestic grain supplies and favorable South American crop prospects as contributing factors to the downturn in sentiment. Some experts also suggested that the selling pressure may have been exacerbated by commodity funds increasing their already-substantial net short positions. The atmosphere of stockpiled crops weighed heavily on market sentiment.
Corn (C_1:COM) for March delivery closed at $4.10 1/4 per bushel on the Chicago Board of Trade, marking the lowest point since November 2020. Meanwhile, March soybeans (S_1:COM) settled at $11.60 1/4 per bushel, down 1.6%, and wheat (W_1:COM) for May delivery ended at $5.77 1/2 per bushel, a 0.3% drop.
Expectations of Abundant Supplies Weigh on Grains
Analysts pointed out that the anticipation of strong supplies for the upcoming crop year has been an influential factor in restraining any bullish momentum in the grains market. The prevailing sentiment suggests that a monumental shift in fundamental factors would be necessary to reverse the current tide and pull the grains from their lows. Matt Zeller of StoneX highlighted that speculative funds persist in driving the market further into an overall net short position.
The recent report by the Commodity Futures Trading Commission (CFTC) indicated larger net short positions for corn and soybeans, an indication that demand was waning, but the analysts also noted a deceleration in the rate at which grain futures were sinking.
Policy Developments Add to Pressure on Corn
Additional pressure came from reports suggesting that the Biden Administration might introduce new regulations that could disrupt the use of ethanol in favor of other biofuels. Furthermore, there was speculation that the administration would sanction the request from a group of Midwest governors to permit year-round sales of gasoline with higher ethanol blends, but delay the implementation to 2025. These developments added to the negative sentiment surrounding corn futures.