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Were Wheat Prices Affected by the WASDE Report?

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Mar. 10 2016, Published 2:09 p.m. ET

Wheat prices rose

Wheat March futures trading on the Chicago Board of Trade (or CBOT) improved by 0.54% and closed at $4.63 per bushel on March 9, 2016. Wheat futures prices rose with the lower production and supportive export projections from the March 2016 World Agriculture Supply and Demand Estimation report. The Teucrium Wheat Fund (WEAT) followed prices on CBOT and advanced by 0.40% on March 9, 2016.

Analysts anticipated that the latest projection from the US Department of Agriculture’s monthly March 2016 World Agriculture Supply and Demand Estimates could remain bearish for wheat. The key reasons for this were stronger production cues from the US and Europe and warmer winter conditions around the world that are reducing the rate of winterkill. However, the estimates released on March 9 contradicted the expectations for the 2015-16 marketing year.

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Wheat production has fallen by 3.5 million metric tons from the previous report to 732.3 million metric tons globally. The total supply estimates fell by 3.3 million metric tons to 947.0 million metric tons. On the other hand, world inventories have fallen by 1.3 million tons to 237.6 million tons because of the concerns in India and Australia. Analysts have also estimated a decrease in exports of 0.4 million metric tons due to stronger availability. In contrast, the US wheat balance sheet has followed February 2016 projections.

Concerned stocks

Food businesses fall when wheat prices rise, as the price increase affects their cost structure. On March 9, Hormel Foods (HRL), General Mills (GIS), and JM Smucker (SJM) rose by 0.55%, 0.82%, and 0.68%, respectively. Pilgrim’s Pride (PPC) fell by 0.57% on March 9, 2016, with the rise in wheat prices. The MSCI India Total Return Index ETF (INP) rose by 1.1% on March 9, 2016, with the increase in wheat prices.

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