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Could Wheat Prices Fall to Season Lows?

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Aug. 18 2020, Updated 6:10 a.m. ET

Trend in wheat prices

After a drop on February 18, 2016, March wheat prices were trading near the key support of 460 cents per bushel. Prices are anticipated to remain range-bound before the March 2016 World Agriculture Supply and Demand Estimation (or WASDE) report. Volumes increased by 26.4% and open interest declined by 5.0% on February 18, 2016. Prices continued to trade below the key 20-day, 50-day, and 100-day moving averages on February 18. With the continued downward movement in prices and the weaker demand scenario, prices might reach new lows.

The chart shows that prices might stay in the range of 470 and 455 cents per bushel in the short run.

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Price drivers

Due to weaker export demand indications, FranceAgriMer pushed the export prospects down by 265,000 tons, which hurt US traders’ expectations and brought down prices on February 18, 2016. However, estimates from the Strategie analyst group suggested reduced wheat inventory at the end of the marketing year 2016-17. The weaker export cues on February 18 hurt wheat prices.

The US dollar depreciated by 0.03% on February 18, 2016, and supported the wheat prices as the weaker US dollar is favorable for US goods in the export market.

Stock review

Lower wheat prices support food businesses, as they reduce the cost of input materials for food companies. On February 18, 2016, companies such as General Mills (GIS) and Campbell Soup Company (CPB) rose by 0.79% and 0.10%, respectively. JM Smucker (SJM) rose by 0.08%, recovering slightly from the previous day’s drop. Dean Foods (DF) rose for the fifth consecutive trading day on February 18, 2016. The Barclays Bank Plc iPath ETN, which is linked to the MSCI India Total Return Index (INP), fell by 0.61% on February 18, 2016.

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