Wheat, while coming second to maize in total production as a cereal crop, is in fact the most important food grain in the world, and therefore an essential component of the world’s commodity trading network. It is the staple food of millions of people all across the world, and has been ever since people developed advanced agricultural techniques thousands of years ago. It is believed that wheat may have been harvested for at least 12000 years, so its pedigree as a food item can not be underestimated. The crop itself is thought to have evolved from a type of wild grass native to the arid terrain of Asia Minor, although as it can flourish in many different climates it is not limited to that region. There are more varieties of wheat than any other cereal crops and these generally fall into two categories – winter wheat and spring wheat – depending in which season they were harvested.
The most special feature of the wheat commodity must surely be its worldwide prominence as a foodstuff. In terms of production, it sits between maize and rice as the second most produced food grain in the world, and yet despite these massive yields of it as a crop, the market never becomes saturated. The wheat market benefits from the fact that wheat can thrive in many different climates making production relatively easy, and it can be harvested in a relatively short space of time. While such a ready supply may not always track with demand in commodities without such worldwide appeal, in the case of wheat this works to its advantage as the demand for wheat is believed to be increasing to even higher levels. Wheat commodities can thus be guaranteed to have a buyer somewhere, a fact of which every trader in the wheat futures market will be acutely aware.
Wheat futures are traded on several exchanges, such as the Chicago Board of Trade (CBOT), the Kansas City Board of Trade (KCBT) and the Zhengzhou Commodity Exchange. CBOT wheat futures, as an example of a typical wheat futures contract, are traded in cents per bushel. A variety of different contact codes or ticker symbols are used for wheat futures, examples being those for Hard Red Winter Wheat futures at the Kansas City Board of Trade: KW for wheat traded by open outcry, and KE for wheat traded electronically.
The largest market for wheat trading is the domestic food market. More than 550 million tonnes of wheat are consumed globally each year, with the European Union, the USA, India and Russia being the most prolific consumers. The EU, India, USA and China are the largest producers of wheat and approximately two-thirds of all the wheat produced is used for food for people. The rest is used for animal feed and some industrial applications.
There are many factors that can affect grain market prices generally, and as with most grain commodity prices, the wheat price is particularly susceptible to changes in the weather. Massive droughts or floods can negatively affect the supply of wheat, which will in turn increase the price of wheat options. It is reasonable to conclude that wheat futures charts will generally always show an upward curve for demand, but sometimes factors such as a change in government policy concerning import can affect wheat trading, and therefore wheat commodity prices. New agricultural technologies can also affect the price of wheat, as production costs will vary depending on the method of harvest, and this can also sometimes create a temporary surplus of the crop, which could decrease spot prices for a time. It is also worth considering the conditions affecting competitor commodities such as corn and rough rice, as chenges in demand or price for these can affect the wheat price.
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