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Wheat Rises above Key Resistance of $4.50

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Trend in wheat prices

March 2016 wheat futures prices were trading near the support level of 455 cents per bushel on March 3, 2016. Prices surged on the day and breached the resistance level of 450 cents. With the rise, wheat prices were trading near the 20-day moving average.

Volume and prior day open interest were lower by 25.2% and 46.5%, respectively, on the day. Anticipations from the wheat price trend are mixed before the World Agricultural Supply and Demand Estimates (or WASDE) report next week.

The above graph indicates that prices might stay in the range of 458–440 cents per bushel in the short run.

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Price drivers

Wheat prices were high on March 3, 2016, because of stronger wheat export demand cues from firm weekly export sales. Dry weather conditions in the US Plains have pushed wheat output consensus down and hurt the supply and supported futures prices on the day. It received support from the depreciation of the US dollar by 0.55% on March 3, 2016.

Stocks review

The increase in wheat prices adversely affects the costs for food companies and hurts their profitability. On March 3, 2016, Dean Foods (DF) shares fell by 0.67%, losing the rise of the previous day. In contrast, J.M. Smucker (SJM) shares recovered from the last day’s drop and rose by 0.39% on March 3.

Pilgrim’s Pride (PPC) rose for the consecutive second trading day by 1.9% on March 3. During the period, it rose by 3.7%. ConAgra Foods (CAG) rose by 0.77% on March 3 for the third consecutive trading day. During the period, it rose by 2.5%. The VanEck Vectors Agribusiness ETF (MOO) rose by 1.3% on March 3, 2016, continuing the upward price movement for the third consecutive trading day. It rose by 1.9% during the period.

In the final part of our series, we’ll see how stronger weekly export demands are driving wheat prices.

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