Wheat Prices Rise for the Second Consecutive Day


Jan. 7 2016, Updated 12:30 p.m. ET

Trend in wheat prices

Wheat futures contracts were trading above the key support level of 460 cents per bushel on January 6, 2016. Prices were higher amid the higher supply pressures around the world. The volume of the contract continued to fall on the second trading day by 8.8%. Also, the open interest rose by 1.6% on the day. The pieces were trading below the key moving averages on January 6, 2016, and the price movement might remain under pressure in the near term.

The chart above suggests that prices could oscillate in the bracket of 450–470 cents per bushel in the near term.

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Price drivers

Egypt’s GASC (General Authority For Supply Commodities) tightened quality parameters, impacting major wheat exporting countries. However, US wheat futures prices rose. The US dollar depreciated slightly by 0.06% on January 6, 2016, and supported wheat export sentiment as a weaker US dollar is favorable for US goods in export markets.

Unfavorably dry weather conditions in the US Midwest and Great Plains kept wheat futures prices under pressure as that would drag wheat to dormant weather conditions. It would negatively affect prices on January 6, 2016.

Stock review

The rise in wheat prices unfavorably influences the food businesses by raising their cost of production. J.M. Smucker (SJM) and Pilgrim’s Pride (PPC) fell by 0.73% and 0.94%, respectively, on January 6, 2016, continuing the fall in the prices hindered by a day’s rise. General Mills (GIS) continued to fall by 0.82% on January 6, 2016, on the fifth consecutive day of downward movement. This hurt the prices of the shares by 3.7% during the period.

On the other hand, Hormel Foods (HRL) advanced by 0.34% for the second consecutive day on January 6, 2016. The VanEck Vectors Agribusiness ETF (MOO) fell by 1.9% on the consecutive fifth trading day on the day. The fall cost the ETF 4.9% during the prior five days.


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