Wheat Prices Continue on the Downward Channel

Grain Prices Fell Due to Export Competition from South America

(Continued from Prior Part)

Trend in wheat prices

March wheat futures prices were trading near the support level of $4.65 per bushel on February 5, 2016. Prices continued to follow the downward trend. Prices fell for the second consecutive day. The volume rose by 49.5%. The open interest fell by 2.7% on the day. Prices traded below the 20-day, 50-day, and 100-day moving averages of $4.75, $4.76, and $4.92 on February 5, 2016. Prices are expected to continue on the downward channel.

The above chart shows that prices could be $4.55–$4.80 per bushel in the short term.

Price drivers

The Egyptian controversy for wheat imports increased due to traders’ boycott. Lower expectations for US wheat exports to Egypt, despite lower freight, pushed wheat prices down. The US dollar appreciated by 0.45% on February 5, 2016. It drove the export sentiments lower on the day.

Statistics Canada’s 2015 inventory report was the lowest in the last eight years. It supported wheat prices in the near term.

Stocks review

The fall in wheat prices supports food businesses. It decreases the input costs. Despite the increase in wheat prices on February 5, 2016, Hormel Foods (HRL) rose by 0.65% after a fall of 4.4% for three consecutive days. Continuing the previous day’s fall, J.M. Smucker (SJM) fell by 0.37% on February 5. Losing the previous day’s gain, Pilgrim’s Pride (PPC) fell by 0.22% on the day. Campbell Soup (CPB) and the PowerShares DB Commodity Index Tracking Fund (DBC) fell by 0.90% and 0.63% on February 5, 2016. They fell for the second consecutive day.

Browse this series on Market Realist:

• Part 1 - Speculation of Higher South American Production Drove Corn Prices

• Part 2 - Corn Prices Traded below the 50-Day Moving Average

• Part 3 - Favorable Output Consensus from South American Soybean Prices