Why Did Strong Weekly Export Sales Drive Grain Prices?
Wheat prices rose
March wheat futures trading on the CBOT (Chicago Board of Trade) rose by 0.54% and closed at $4.63 per bushel on March 9, 2016. Wheat futures prices boosted wheat export sentiments despite the stronger availability and tough pricing competition. The Teucrium Wheat Fund (WEAT) followed the prices on the CBOT and rose by 0.40% on March 9, 2016.
The U.S. Department of Agriculture’s Weekly Export Sales report for the week from February 26 to March 3, 2016, released on March 10, 2016. The net weekly export sales for the week ending on March 3 were 330,618 metric tons for 2015–2016. It was down 4% from the previous week, but up 6% from the previous four-week average. The increase in wheat export sales was reported for Japan, Taiwan, Mexico, Guatemala, Venezuela, and Colombia, However, the exports from Ecuador and Leeward Windward Islands declined. For 2016–2017, wheat exports for South Korea, Italy, Mexico, and Honduras were reported at 102,900 metric tons. The export data was in the middle of the expected range. It supported the demand prospects on March 10.
The US Dollar Index tracks the dollar against a currency basket. The euro accounts for more than half of the basket. The European Cental Bank cut the reference rate to zero. This pushed the deposit rates down with the announcement of quantitative easing. The euro fell and the US dollar rose. The reverse in the euro resulted in the depreciation of the US dollar at the end of the day by about 1% on March 10, 2016. The lower US dollar supported dollar-denominated commodities in the exports market like wheat reviving the export prospects.
Food companies would fall sharply with the firm rise in wheat prices. Wheat is an essential ingredient in many food items. Businesses such as Hormel Food (HRL) fell by 0.96% on March 10, 2016. However, ConAgra Foods (CAG), J.M. Smucker (SJM), and General Mills (GIS) rose by 0.35%, 1.1%, and 0.13% on March 10, 2016. The PowerShares DB Agriculture Fund (DBA) rose by 0.93% on March 10, 2016.
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