Depreciation in the US Dollar Index Supports Wheat Prices

Sean Brown - Author

Dec. 10 2015, Published 9:51 a.m. ET

Wheat prices rose

Wheat futures prices for December contracts on the CBOT (Chicago Board of Trade) rose by 1.5% and closed at $4.78 per bushel on December 9, 2015. Wheat futures prices rose due to technical buying supported by the depreciating US Dollar Index. ETFs like the Teucrium Wheat Fund (WEAT) followed the CBOT and rose by 1.2% on December 9, 2015.

Technical buying supported the wheat futures price sentiment on December 9, 2015. With the US Dollar Index falling by 1.0% on December 9, the US wheat export sentiment received support. Bargain hunting and the weak US dollar supported wheat futures prices.

The U.S. Department of Agriculture released the WASDE (World Agriculture Demand and Supply Estimates) report on December 9, 2015. The report kept the US wheat balance sheet nearly unchanged with marketing year end inventories of 229.9 million metric tons and output of 734.9 million metric tons.

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However, the report increased the world ending inventories to 229.9 million tons compared to the November report of 227.30 million tons. The wheat inventories were higher than analysts’ consensus projection. This supported the supply sentiment on December 9, 2015. The report also increased Argentina’s wheat export projections by 1 million tons due to favorable export policy changes. It increased the export projections from Ukraine and Canada due to favorable output cues. The overall report supported the supply. According to traders’ anticipation, the market didn’t react much to the report.

The weather conditions in Ukraine were favorable. Dry regions received rain on December 9, 2015. According to the reports from Ukraine’s Department of Agriculture, 17% of the wheat crop is in the poor condition due to the dry conditions in the summer and autumn. Rising production sentiment from Ukraine would toughen the wheat export sentiment for US exports.

Concerned food businesses

Food companies would lose as wheat prices increase because of the rise in their costs. Companies like Hormel Foods (HRL), General Mills (GIS), and J.M. Smucker (SJM) fell by 0.91%, 0.73%, and 0.73% on December 9, 2015. Pilgrim’s Pride (PPC) rose by 0.76% on December 9, 2015. ETFs like the VanEck Vectors Agribusiness ETF (MOO) rose by 0.64% on December 9, 2015.


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