Stock Market Turmoil Could Drive Grain Prices Higher

AgriBusiness 10-19
Falling equities could entice managed money to commodities ( FJ Stock )

During the Tuesday, October 23, trading session, the Dow fell more than 500 points at one time during the day before settling back higher. New warnings from companies like Caterpillar (CAT) about trade tariffs and rising costs of raw materials helping to fuel that drop. Analysts say, however, it may take continued turmoil in the stock market to drive investors back to commodities.

"You should see, at some point, money comes out of equities into commodities," Doug Werling with Bower Trading tells AgDay TV's, Clinton Griffiths. "You'll see some markets that have turned down most of the year starting to trade higher."

Werling says a lot of fund managers are short commodity markets right now. When they decide to get out of equities and lighten their risk that will likely change.

"They have to change those positions," says Werling. "They will look at [commodities] because some, for example, are at 10 or 15-year lows."

He expects equity market turbulence to continue as the impacts of trade tariffs and higher interest rates begin to show up on balance sheets.

"Equities take a certain [amount of] time because their indicators are more delayed," says Werling. "It's not a futures market like commodities where we hear 'tariff' and the market immediately drops off."

But as tariffs, higher fuel costs and interest rate trickle through the economy Werling believes the 'value' of commodities will entice more money into the system. 

"It could help the grain trade more than people realize," says Werling.