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Wheat Prices Traded at the Crucial Support

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Trend in wheat prices

Wheat futures contracts for March delivery were trading near the crucial support level of $4.70 per bushel on December 31, 2015. Prices rose slightly but held the key support level on the last day of 2015, despite bearish fundamental conditions. Due to the sharp downward movement last week, the volume of the contracts was 51.7% lower. The open interest fell by 34.80% on December 31. The key moving averages remain higher than the prevailing wheat prices.

The above chart suggests that wheat could be $4.65–$4.80 per bushel in the near term.

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Price drivers

In line with the analysts’ projection, the U.S. Departmnent of Agriculture’s weekly export sales data supported wheat prices on December 31, 2015. A delay in the progress of Argentina’s wheat harvest supported wheat prices for exports on the day.

The unfavorable cold weather wouldn’t negatively affect the wheat acreage in Russia and Ukraine due to sufficient snowfall. It supported the US wheat competition in the export market on December 31, 2015. The US dollar rose by 0.48% on December 31, 2015. It hindered the US wheat export sentiment because the higher dollar isn’t favorable for exports.

Stocks review

The rise in wheat prices would negatively affect the food businesses by increasing their cost of inputs. Food companies like General Mills (GIS), Hormel Foods (HRL), Pilgrim’s Pride (PPC), and J.M. Smucker (SJM) fell on December 31, 2015, for the second consecutive day. During the two days of downward price movement, the shares of these businesses fell by 2.1%, 1.8%, 1.8%, and 1.2%, respectively. ETFs like the VanEck Vectors Agribusiness ETF (MOO) also fell for the second consecutive day by 0.92% on December 31, 2015. It fell by 1.7% in the previous two days of trading.

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