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Weather Predictions for the US Wheat Belt Supported Wheat Prices

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Wheat prices rise

Wheat futures prices for March contracts on the Chicago Board of Trade (or CBOT) rose by 0.57% and closed at $4.86 per bushel on December 18, 2015. Wheat futures prices rose on account of dormant weather conditions anticipated shortly in the US Wheat Belt. The Teucrium Wheat Fund (WEAT) followed CBOT, and increased by 0.48% on December 18, 2015.

Forecasts for the US Wheat Belt are calling for precipitation in the week ending December 27, 2015. The precipitation would support wheat prices as the temperature remains above average. According to the National Weather Services forecasts, winter will set in, and wheat will face dormancy at the end of the week. Speculation of freezing weather in the near term hurt the wheat supply sentiment on December 18, 2015, and wheat futures prices increased.

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On December 18, the European Union reported that the output expectations for harvest season for the marketing year 2015-16 were unchanged at 149.15 million metric tons from the previous month. Favorable weather conditions and production projections could result in higher export sales competition for US wheat. Wheat futures prices could fall due to speculation of higher output from the European Union.

Morocco is seeking 360,000 tons of soft wheat and 315,000 tons of Durum wheat from the US. The critical information would provide US exporters with an opportunity for US exports. The volatility in wheat prices in the last couple of days could provide an opportunity to speculators and exporters in the week ending on December 27, 2015.

Food company stocks

Rising wheat prices would hurt food businesses, as their input costs would rise. Companies like General Mills (GIS), JM Smucker (SJM), and Hormel Foods (HRL) dropped by 0.52%, 1.7%, and 0.87% on December 18, 2015, respectively. Pilgrim’s Pride (PPC) rose by 0.76% on December 18 on the day. The VanEck Vectors Agribusiness ETF (MOO) fell by 0.46% on December 18, 2015.

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