Speculation of Lower Export Prospects Dragged Wheat Prices Down
Twists and Turns: Export Prospects Drove Grain Prices
Wheat prices fell
March wheat futures trading on the CBOT (Chicago Board of Trade) fell by 1.5% and closed at $4.72 per bushel on February 4, 2016. Wheat futures prices fell due to speculation of lower export prospects. The Teucrium Wheat Fund (WEAT) followed the prices on the CBOT. It fell by 1.1% on February 4, 2016.
The U.S. Department of Agriculture’s Foreign Agricultural Services released the Weekly Export Sales Report on February 4, 2016, for the week of January 22–28, 2016. The weekly net wheat export sales of 66,155 metric tons were 78% lower than the previous week and 74% lower than the last four-week average. These were the lowest weekly export sales of marketing year 2015–2016. Increases in the export sales were reported for Mexico, Yemen, Trinidad, Liberia, El Salvador, and South Korea. In contrast, Honduras, Nigeria, the Dominican Republic, and the Philippines recorded reductions in wheat export sales. The speculation of lower export sales prospects due to higher supplies and stronger production pushed wheat prices down on February 4, 2016.
The wheat production sentiments from India were less than previous expectations. Unfavorable weather conditions negatively affected the output consensus. Stronger demand from India could support international prices. At the same time, a depletion of the snow cover in the wheat producing regions is expected in the northern hemisphere. The wheat will be vulnerable to freezing conditions if the snow cover depletes. The weather conditions suggest that it could hurt the snow cover and wheat crops. Speculation of unfavorable output could drive prices in the near term.
Fertilizer companies stock
Fertilizer companies would decline due to lower wheat prices. Lower farm incomes would drag down fertilizer sales’ prospects. Businesses including Mosaic (MOS), Potash Corporation of Saskatchewan (POT), Intrepid Potash (IPI), and Monsanto (MON) rose by 3.6%, 4.2%, 13.3%, and 6.5%, despite the rise in wheat prices. The PowerShares DB Commodity Index Tracking Fund (DBC) fell by 0.16% with the fall in wheat prices on February 4, 2016.
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