Could Falling Global Output Cues Support US Wheat?

Sean Brown - Author

Nov. 20 2015, Published 4:20 p.m. ET

Price trend

Wheat futures contracts for December expiry were in the range of 480–490 cents per bushel on November 19, 2015. Wheat opened lower at 483 cents and gained support from exports, closing above 390 cents per bushel on the day.

Wheat contract volume and open interest fell by 11.8% and 8.2%, respectively, on November 19, 2015. Closing prices on the day were below the 20-, 50-, and 100-day moving averages of 504 cents, 502 cents, and 509 cents per bushel, respectively.

Due to drought-like conditions in the Ukraine, wheat production could fall. The International Grain Council reduced the productive wheat area by 1% year-over-year to 221.8 million hectares.

Estimates also say that projected wheat exports may be limited to 16.6 million tons. World wheat production could fall further due to unfavorable weather cues from India, Australia, and the Black Sea region.

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Price driving factors

Commercial and technical buying supported by high weekly export sales pulled wheat prices up on November 19, 2015. Pre-winter weather conditions are dragging wheat toward dormancy in the United States.

US wheat sales of 81,000 tons of Japan’s tender and 30,000 tons of Israeli tender supported wheat prices rise on November 19, 2015. The US Dollar Index fell by 0.59% on the day, supporting the demand sentiment.

Wheat futures prices could oscillate between 475–495 cents per bushel from the indications of support and resistance.

Stock discussion

A higher-than-projected earnings report boosted shares of The J.M. Smucker Company (SJM) in its 3Q15 earnings report released on November 19, 2015. Hormel Foods (HRL) rose for the second consecutive trading day by 0.57% on November 19. General Mills (GIS) and Pilgrim’s Pride (PPC) continued their volatile price patterns, falling 0.45% and 1.2%, respectively, on the day.

The VanEck Vectors Agribusiness ETF (MOO) fell by 0.78% on November 19, 2015, putting an end to its four-day rising price pattern by 3.0%.


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