Wheat Futures

Market

Wheat futures are standardized, exchange-traded commodities futures contracts. The contract buyer agrees to take delivery of a specific quantity of wheat (i.e. 5,000 bushels) from the seller at a predetermined price on a future delivery date.

History

Wheat futures began trading in 1877. The wheat futures contract evolved as farmers (sellers) and dealers (buyers) began to commit to future exchanges of wheat for cash. The two parties exchanged a written contract representing a "guarantee." Such contracts became common and were even used as collateral for bank loans.

Facts

  • As a commodity, wheat is grown on more land area than any other commercial food
  • World trade in wheat is greater than all other crops combined
  • Globally, wheat is the leading source of vegetable protein in human food, with a higher protein content than other major cereals, maize, corn or rice
  • There are six wheat futures classifications: 1) hard red winter, 2) hard red spring, 3) soft red winter, 4) durum (hard), 5) hard white and 6) soft white wheat

Chicago SRW wheat is the most liquid wheat futures contract in the world, trading the equivalent of more than 15 million tons each day in 2013-9 ½ times more than the largest European contract. Wheat futures prices are 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 futures. Prices in competitive commodity futures products such as corn and rice futures are also a factor.

Trading

  • Wheat is traded on the Chicago Board of Trade (CBOT), NYSE Euronext (Euronext), Kansas City Board of Trade (KCBT) and the Minneapolis Grain Exchange (MGEX)
  • Both wheat futures traded on CBOT and the KCBT are used as benchmarks for wheat prices in general. However, generally speaking, the term "wheat futures" refers to wheat futures traded on the CBOT while wheat futures traded on the KCBT are specified to be "KCBT wheat," "KC wheat" or "Kansas City wheat"
  • CBOT wheat futures prices are quoted in dollars and cents per bushel and are traded in lot sizes of 5000 bushels (136 metric tons)
  • Euronext milling wheat futures are traded in units of 50 tonnes and contract prices are quoted in dollars and cents per bushel
  • Euronext wheat (No. 405) futures prices are quoted in pounds and pence per metric ton and are traded in lot sizes of 100 tonnes

 

Contract Specifications

Contract SymbolContract UnitPrice Quotation
ZW5,000 bushelscents per bushel
Trading ExchangeTrading HoursTick Value
CME GLOBEX8:30 - 13:20,
19:00 - 7:45
1/4 cent = $12.50

 

 

Fundamentals of Trading Agricultural Futures

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.