Cultivated worldwide, wheat is a grain which has always peaked investor interests, as it is one of the most important food components. Trading wheat futures CFDs allows traders to participate in the agricultural markets without holding actual tons of wheat.
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Wheat trading markets
Wheat commodity trading can take place on several exchanges, however, there are two main exchanges that are listed in wheat futures: Chicago Board of Trade (CBOT) and NYSE Euronext (Euronext). Wheat futures prices are quoted in USD and cents (USD) per bushel.
Wheat trading hours and other trading information:
- Wheat trading hours: 01:00-13:44 and 14:30-19:14 (GMT)
- Margin: 3.00%
- Spread: Fixed
- Minimum trade size: 1
- Contract size: 100 Bushels
- Ticker symbols: Open outcry W (under CBOT) Electronic Symbol: ZW
- MT4 symbol WHEAT
- Price Quote: cents per bushel
- Tick size: 0.25 cents per bushel
Wheat is a predominant food staple, and has stamina in harsh climates. Another advantage of wheat production is the grain can be harvested in a fairly short amount of time, and there is such a ready supply of wheat even though it comes in second to maize, it is a crucial element of the world’s commodity trading network. These factors contribute to the growing demand for the commodity when trading wheat.
Wheat Price influences
As with every commodity there are multiple factors that affect the grain market. In particular, weather plays one of the biggest roles in the harvest of wheat. Even though wheat is a robust grain, massive droughts or floods will negatively affect the supply of wheat, which lends itself to increase the harvesting/production process on all wheat products, therefore increasing its price in the market. Most wheat futures charts will show an upward trend in the demand of the produce, however, factors such as a change in government policy regarding import can affect wheat trading and in turn wheat trading price.
New agricultural technologies can also affect the trading price of wheat as production costs can vary depending on the method of harvesting the grain, hence, creating a surplus of crop which could decrease spot prices temporarily. Competitor commodities such as corn and rice, changes in their demand and prices will also directly influence the price of wheat.
With the European Union producing 160,012 thousand metric tons of wheat annually, China (130,190) and India (86,530), they are amongst the largest producers of wheat worldwide.
Countries that are in the highest demand and consume wheat are countries that mostly experience high food prices, these are generally poorer countries, or the consumption of wheat for livestock in countries that thrive on importing and exporting meat or ‘wheat feeding’ bi-products.
It is also worth considering that other competitive products that either decrease in availability or increase price will have a direct effect on the consumption of wheat in any country.
The countries that are the highest consumers of wheat are China with an annual consumption of 124,000 (thousand metric tons) with India at a consumption of 123,725 (1000 metric tons) and Australia using the wheat for feeding their masses of livestock.
Wheat trading tips
Both producers and consumers of wheat can manage wheat price risk by purchasing and selling wheat futures. In this wheat trading strategy producers will employ a short hedge to lock in a selling price for wheat, while consumers utilize a long hedge to secure a purchase price for wheat.
Traders on the other hand, will assume the price risk, that hedgers will avoid, in return for profit from a movement in the wheat price. When prices are believed to increase traders then buy the commodity, the adverse is true when speculating a sell. Traders can keep up with changes with this commodity by keeping abreast of the wheat trading news.
Grain trading can also have either a direct positive or negative affect on wheat as a CFD underlying asset. Should speculators assume the price of the competitor product will either increase or decrease it will affect the price of wheat directly.
Seasonal consumption and production affect these markets, it is important for grain traders to keep up to date with weather forecasts, and political and governmental factors that will directly affect wheat producing countries. This is the best way of gaining a complete understanding of the commodities predicted movement within a certain time frame.
Advantages for trading Wheat with AvaTrade
- Up to leverage on wheat CFD trading online
- Trade on a 17.5 hours a day market
- 24/5 support in 14 languages
- An internationally regulated broker
Main Wheat trading FAQ
- Why should I trade wheat?
Wheat is a unique grain in the commodities markets because unlike corn and soybeans it is uniquely a human crop. Where corn and soybeans are likely to end up as fodder for animals, the same can’t be said for wheat. This gives it a different price dynamic that can be easier to analyze and trade. Also, because wheat is so widely used it can be subject to rapid price changes. A limit move in wheat contracts isn’t unusual and is worth $1,500 per contract. That makes wheat attractive to traders looking for quick profits.
- What should I know before I start trading wheat?
There are two types – Chicago Soft Red Wheat and Kansas City Hard Red Wheat. The Chicago contract is the most liquid global wheat contract. Prices for wheat can change rapidly and dramatically for several reasons, including weather and changing demand for wheat based products. Of the two, weather is by far more important. Wheat prices are measured in ¼ cent increments. A $0.10 move in the price of wheat equals a $500 change in the price of a single wheat contract.
- What is the best way to trade wheat?
Those who are simply interested in speculating on price changes in the wheat contract should consider trading wheat with CFDs. This allows for speculating on the price of wheat without needing to worry about the complexity of futures and options trading, or the extra costs associated with each. Trading CFDs is a quick and easy way to access the wheat markets, plus new traders can get started with smaller initial deposits. That allows them to get their feet wet in this market without needing to worry about potentially large losses.
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