Trend in wheat prices
March 2016 wheat futures prices were near the crucial support of 465 cents per bushel on March 9, 2016. Prices continued to progress on the rising price channel for the sixth consecutive trading day. Volumes fell by 5.2%, and open interest fell by 32.2% on March 9. Prices were trading near the 50-day simple moving average. Plus, analysts believe that prices could increase further in the near term.
The chart above suggests that wheat prices could stay in the range of 455 to 465 cents per bushel in the near term.
The USDA’s monthly edition of the World Agriculture Supply and Demand Estimation report released on March 9 induced rapid reactions from the majority of the market players but did not lead to a significant price change in the futures. The production estimates were weaker than the consensus, and the export prospects were gloomy on account of widespread availability after a warm winter in the wheat-producing regions. Even so, wheat prices rose on March 9.
The US dollar depreciated by 0.01% on March 9, 2016, and supported the export sentiments, as weaker domestic currency is favorable for exports.
The rise in wheat prices hurts the profitability of food companies, as their input costs go up. JM Smucker (SJM) rose by 0.68% on March 9, 2016, after three consecutive days of downward price movement for a total of 1.6% despite rising wheat prices. Hormel Foods (HRL) and General Mills (GIS) rose for the second consecutive trading day on March 9, 2016, by 0.55% and 0.82%, respectively. In contrast, Pilgrim’s Pride (PPC) fell by 0.57% after two consecutive days of rising. The MSCI India Total Return Index ETF (INP) rose by 1.1% on March 9, recovering from the previous day’s drop of 1.6%.