Invest in wheat: in brief
- The price of wheat is quoted on the CBOT market in the United States
- You can invest in wheat online using ETFs or futures contracts.
- Traders can also trade wheat online using CFDs
- Investing in wheat requires technical and fundamental analysis.
First of all, you need to keep an eye on the weather and climate conditions in the producing countries. The vagaries of the climate will have a major influence on production levels. Poor weather conditions can significantly slow wheat supply, and vice versa.
Stock levels will also be closely monitored. Indeed, the rise or fall of wheat stocks is above all due to the evolution of demand and supply. When wheat production is high or demand is low, stocks increase and conversely when production is low or demand is high.
Another interesting fact to follow is that world demographics will have a direct influence on wheat demand. Indeed, let's remember that the main uses of this cereal are for human and animal food. An increase in the world population will automatically lead to an increase in demand. However, this evolution factor must be analyzed in the long term because the impact of a demographic evolution is not immediate.
You should also keep a close eye on the agri-food sector and its development. Strong sales in this sector imply strong demand for wheat, while weak sales tend to indicate weak demand.
Finally, it will also be necessary to focus on developing countries which tend to accelerate the world demand for wheat due to the strong migration of their populations from the cities to the countryside and the increase in income and standard of living which will also increase consumption and therefore demand.
Of course, a technical analysis of the wheat price based on stock market charts will also be essential.
First, let's take a moment to make sure you have the knowledge you need about the wheat market to understand the major issues and opportunities for growth.
Wheat is currently the second most consumed cereal in the world, with rice still being the first. And the wheat market is particularly important because it has multiple uses. Indeed, if wheat is mainly used for human consumption with nearly 600 to 700 million tons consumed per year, it is also used for other purposes.
In fact, human consumption represents 58% of the demand and corresponds to the agri-food sectors with a main use in the manufacture of bread and pasta. Next comes animal consumption with 34% of the demand where it is used for cattle feed, mainly in developing countries. Finally, 8% of wheat is also used by industry, particularly in the manufacture of cosmetics and in the dietetics sector.
As far as wheat production in the world is concerned, the European Union is the largest producer in the world, with France in fourth place. Then comes China which produces 19% of the world wheat, India, the United States, Russia and Canada.
As we will see below, wheat is traded on the over-the-counter market and between co-contractors. But it is also traded on some regulated markets. The largest volumes of wheat are traded on the CBOT or Chicago Board of Trade which was absorbed by the CME or Chicago Mercantile Exchange in 2008.
There are several ways to invest in wheat on the stock market, including ETFs (Exchange Traded Funds), shares or CFDs (Contracts for Difference). Here is an overview of each of these methods:
In conclusion, investing in wheat on the stock market can be done via ETFs, stocks or CFDs. Each of these methods has advantages and disadvantages, and it is important to understand the risks and benefits of each method before making an investment decision. It is recommended that you consult an investment advisor or commodity market expert before making any investment decision.
As mentioned above, wheat trading is over-the-counter and on the CBOT and CME futures markets.
There are also very active futures and options exchanges, in contracts of 5,000 bushels (one bushel corresponds to 27.2 kg) on the CBOT, but also on the Kansas City Board of Trade (KCBT), the Minneapolis Grain Exchange (MGE) and the Winnipeg Commodity Exchange (WCE) in Canada, or on the London International Financial Futures and Options Exchange (LIFFE), which is part of the American-European platform NYSE-Euronext, as well as on the Buenos Aires Stock Exchange.
Internationally, the reference wheat is called "soft red winter" and is quoted on the CBOT market. However, it is important to understand that this quotation nowadays represents the reality of the domestic price in effect on the American market as well as a trend indicator. As we have seen above, there are several factors likely to influence the price of wheat through an influence on supply and demand with, in particular, a strong climatic dependence such as the level of stocks or the commercial policies of the States with export and import subsidies.
The price of wheat has changed significantly over the last few decades. Here are a few key points:
19th century:
20th century:
21st century:
Here is a summary table of wheat price trends over the last 10 years:
| Year | Average price (dollars per tonne) | Change on previous year |
|---|---|---|
| 2014 | 230 | +12.2% |
| 2015 | 185 | -19.6% |
| 2016 | 160 | -13.5% |
| 2017 | 180 | +12.5% |
| 2018 | 225 | +25.0% |
| 2019 | 200 | -11.1% |
| 2020 | 195 | -2.5% |
| 2021 | 235 | +20.5% |
| 2022 | 220 | -6.4% |
| 2023 | 230 | +4.5% |
Yes, it is possible to consult the price of wheat on Euronext. Here are the different options available:
1. Euronext website:
2. Trading platform:
Since August 15, 1936, when the law was passed to create the ONIB or Office national interprofessionnel du blé (National Interprofessional Wheat Office) whose mission is to set the price of wheat for millers, this organization has had a monopoly in France for the import and export of wheat and its derivatives. But the price of wheat on the stock exchange is determined by market supply and demand and therefore varies according to these elements and according to international exchanges.
By analysing the historical graphs for wheat, we can see that the major increases in the price of this commodity are often correlated to changes in supply and, in particular, to the climatic conditions and the arbitrations of the cereal producers which have influenced it. Supply therefore seems to have a greater impact than demand on the evolution of the price of this commodity.
To invest in wheat on the stock market, it is of course not a question of physically buying this commodity but rather of using specific contracts and in particular derivative products such as CFDs to speculate on its price. These contracts are available online via the trading platforms of certain brokers and allow you to trade on the rise and fall of this value.
