Why Did Weekly Export Sales Influence Grain Prices?
Wheat prices rose
March wheat futures trading on the CBOT (Chicago Board of Trade) rose by 0.56% and closed at $4.45 per bushel on February 25, 2016. Wheat futures prices rose due to higher-than-expected export sales from the U.S. Department of Agriculture’s weekly report. The Teucrium Wheat Fund (WEAT) didn’t follow the prices on the CBOT. WEAT fell by 0.23% on February 25, 2016.
The U.S. Department of Agriculture released the Weekly Export Sales report for February 12–18, 2016, on February 25. Wheat’s net weekly export sales for the week ending on February 18 were 387,919 metric tons. It was 53% higher than the previous week and 77% higher than the prior four-week average. Major destinations with increases in US wheat export sales were Japan, Mexico, Colombia, and Peru. The wheat export sales reduced from Chile. The larger-than-projected weekly export sales supported the demand sentiment. It also supported the futures prices on February 25, 2016.
The Argentine Agriculture Ministry revised its wheat production projections on February 25, 2016. The revised forecast expects 300,000 tons of increased output for marketing year 2015–2016. The speculation of stronger Argentine supplies along with the recent depreciation of the Argentine peso would compete with US wheat and hurt the export prospects. The fear of more export competition for US wheat hurt futures prices on February 25, 2016.
The General Authority for Supply Commodities is Egypt’s main supply authority. It bought 300,000 tons of wheat at a rate of $177.06 per ton excluding freight on February 25. According to the reports, the prices were $9.49 lower per ton from the February 19, 2016, tender. Despite the historically low participations in the bidding, the top wheat importer in the world was able to source wheat at competitive rates. It shows that the wheat market would face cut-throat competition. The US might not have an upper hand in covering the market due to higher costs.
Food companies stock
The increase in wheat is negative for food companies. It would increase the cost of production and reduce the profitability. The share values of Tyson Foods (TSN), ConAgra Foods (CAG), General Mills (GIS), and Hormel Foods (HRL) rose by 1.7%, 1.2%, 2.0%, and 0.37% on February 25, 2016. The Market Vectors Agribusiness ETF (MOO) rose by 0.93% with the increase in wheat prices on February 25, 2016.
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