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Why Are Wheat Prices Expected to Take a Weaker Tone?

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Trend in wheat prices

Wheat prices continued to rise on March 8, 2016. It boosted the wheat prospects. The prices traded above the 20-day simple moving average on March 8. The volume increased by 84.3%, but the open interest fell by 11.4% on the day. The prices continued to trade in the upward price channel above the high support level of $4.60 per bushel on March 8. The prices have weaker expectations for the upward movement according to analysts’ estimates for the World Agriculture Supply and Demand Estimates report for March 2016.

The above chart indicates that prices could be $4.60–$4.70 per bushel in the short term.

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Price drivers

The European Commission’s projection of a steady increase in the wheat inventory, due to higher production and weaker export prospects, might support US wheat in the export market. However, a strong competition expectation from France could challenge the price competitiveness of global wheat exporters with high expectations from the harvest in 2015. The US dollar appreciated by 0.05% on March 8, 2016. It hurt the wheat export prospects in the near term.

Stocks review

Rising wheat prices impact the profitability of companies in the food business. Companies such as J.M. Smucker (SJM) fell by 0.47% on March 8 with the increase in wheat prices. It fell to 1.6% during the period. The share values of Archer Daniels Midland (ADM) fell by 3% on March 8, 2016, for the second consecutive trading day. It fell by 4.3% during the period. General Mills (GIS) and Hormel Foods (HRL) rose by 0.6% and 0.55% on March 8, 2016. They recovered after falling for two days and one day, respectively. The MSCI India Total Return Index (INP) fell by 1.6%. It fell for the second consecutive trading day on March 8.

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