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Wheat Prices Could Shift to a Downward Channel

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Trend in wheat prices

Wheat futures prices for March contracts were trading near the crucial support of $4.70 per bushel on January 28, 2016. Prices breached the critical support of $4.75 per bushel on January 28. Prices fell for the second consecutive day. This could indicate more price movement on a downward price channel. The volume fell by 32.2%. The open interest rose by 2.3% on January 28, 2016. Prices traded below the key 20-day, 50-day, and 100-day moving averages of $4.73, $4.78, and $4.93 per bushel on January 28, 2016.

The above chart suggests that prices would be $4.65–$4.80 per bushel in the short term.

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Price drivers

There was higher export competition from the European Union. Favorable weather conditions were expected from key wheat producing regions in the US. Also, there were weaker import expectation and a large inventory build with high output projections. These factors dragged wheat prices down on January 28, 2016.

The US dollar depreciated by 0.03% for the second consecutive day on January 28, 2016. It supported wheat export sentiments on January 28, 2016.

Stocks review

Fertilizer companies would benefit from a rise in wheat prices. It would support the farm income. A rise in the farm income helps farmers buy fertilizers. As a result, fertilizer companies’ shares rise. With the fall in wheat price shares, Intrepid Potash (IPI) and Potash Corporation of Saskatchewan (POT) rose for the third consecutive trading day on January 28, 2016. They rose by 1.9% and 2.1%. Prices rose by 2.3% and 6.7% during the period. Terra Nitrogen (TNH) rose by 1.6% on January 28, 2016. It continued to rise from the previous day. Mosaic (MOS) rose by 1.9% on January 28, 2016. It recovered from a 1.2% loss the previous day. The PowerShares DBCommodity Index Tracking Fund (DBC) rose by 1.12% for the third consecutive day on January 28, 2016. It rose by 3.2% during the period.

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