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Favorable Weather Forecasts for the Wheat Belt Drove Down Prices

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Dec. 4 2020, Updated 10:52 a.m. ET

Wheat prices fell

Wheat futures prices for December contracts on the Chicago Board of Trade dropped by 0.36% and closed at $4.82 per bushel on December 11, 2015. Wheat futures prices fell due to favorable weather conditions for higher output. The Teucrium Wheat Fund (WEAT) followed CBOT and fell by 0.94% on December 11, 2015.

Forecasts for the US Wheat Belt are calling for rain in the week ending December 19, 2015. Warmer weather from El Niño has reduced the dormancy period for the wheat crop in the Northwestern region. Plus, precipitation would support wheat plants in increasing the wheat output for the marketing year 2015-16.

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Excess supply sentiment from a potential Argentinian export policy change could hurt US wheat exports in the near term. The official announcement is expected in the week ending December 18, 2015. We could see sharp adverse price movements in the near term. US wheat could lose long-term buyers like Brazil, as Argentinian wheat could offer significant cost and freight advantages. The significant threat to wheat exports might result in a sharp decline in wheat futures prices in the near term.

Food companies

Food companies generally benefit from a decline in wheat prices because of the fall in input costs. However, JM Smucker (SJM), General Mills (GIS), and Pilgrim’s Pride (PPC) dropped on December 11, 2015, by 1.2%, 1.2%, and 4.9%, with a decline in wheat prices. Hormel Foods (HRL) rose slightly by 0.45% on December 11, 2015. The VanEck Vectors Agribusiness ETF (MOO) also fell by 1.7% on December 11, 2015.

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