Wheat Prices Continue to Trade above 20-Day Moving Average
Lower Supply Expectations Supported Grains Prices
Trend in wheat prices
Wheat futures contracts for March expiry were trading at the critical support of 475 cents per bushel on January 21. Price movements are anticipated to remain range-bound for the near term. The contract volume rose by 17.1% while the open interest advanced by 0.25% on January 21, 2016. Prices continued to trade above the 20-day moving average of 470 cents on the fourth consecutive day.
The chart above suggests that prices could stay in the range of 454 to 480 cents per bushel in the short term.
Price drivers
Unfavorable weather conditions in the US Midwest and the Black Sea region threaten higher winterkill and lower supply. Thus, weather conditions supported wheat prices on January 21, 2016. Lower production cues from the Stratégie Grains forecast for the European Union supported the US wheat export sentiment.
Higher-than-expected yield projections from Argentina’s Buenos Aires Grains Exchange and Agriculture Ministry negatively affected futures prices on January 21. The US dollar appreciated slightly by 0.03% on January 21, 2016, which influenced wheat export sentiment, as a higher US dollar is not favorable for export markets.
Stock review
The increase in wheat prices results in adverse price movements in food businesses where wheat is used as an input material. On January 21, 2016, rates of JM Smucker (SJM), General Mills (GIS), and Hormel Foods (HRL) fell by 0.10%, 0.81%, and 1.4%, respectively. Prices fell by 0.39%, 3.1%, and 2.4%, respectively, for these shares over the past two days. Pilgrim’s Pride (PPC) fell by 1.0% on January 21. It has fallen by 11.2% in the past six days. The Market Vectors Agribusiness ETF (MOO) rose by 0.5% on January 21 after three straight days of downward price movement that resulted in a 2.5% loss.
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