Centuries of Wheat:
Wheat has provided food for humans and has been around for thousands of years. Believed to have origins in Southwestern Asia, the earliest remains of wheat have been found places like Jordan, Syria, and Turkey. Wheat’s more primitive relatives have been found in some of the oldest archaeological site sites in the world such as Iraq and the Nile Valley, India, and China.
Today, around 36 percent of the world’s wheat production comes from Asia while 17 percent from the European Union, and 16 percent from North America. The leading wheat producers of the world are China, France, India, Russia, and the United States.
Wheat was traded higher in the late 1980s due to the fall of communism. This saw wheat later reaching a price of $6.00 per bushel in 1996. However hit went so low that it reached a near 2.00 10 years later and rose back up in 2007 thanks to a small uptrend and would align with the simultaneous rise in both the crude oil and real estate markets in 2008 peaking at 12.00.
Unfortunately, the downtrend experienced in 2009 would give up the 100% of the gains brought in from the years 2005 – 2008 leading to a strong recovery effect that rose to 9.00 3 years later. Wheat experienced as simultaneous rise and decline and in 2014. Wheat spent the whole year of 2015 jumping along the support levels as it did in the early 1990s.
The decline in price movements for wheat has cautioned investors against long positions until its trend line of 2001 is successfully tested.
Wheat’s supply and demand is determined by the temperature, the amount of water that falls, and the ever changing needs of consumers. All of the factors mentioned earlier seriously affect the price of the commodity.
As with all commodities, wheat is part of the grain futures contracts; this type of contract binds the agreement of the delivery of future grain at an agreed-upon price. The only thing that varies in the contract is the price while the quality, quantity, time, and place of delivery are formalized by the contract’s future exchange.
However, those interested in investing in grain futures must also know that, as with all investments, the risk of loss may be large and an investor may lose more than what was originally plan to be invested. Because of this it is recommended that the investor only use their risk capital. Risk capital is the amount of money the investor can afford to invest in the market.
Grains are traded in the Chicago Board of Trade or CBOT.
Apart from its function as food for humans and feed for animals, wheat is also an ingredient for bread flour and pastas.
A wheat contract has a delivery of 5,000 bushels and is traded in dollars and cents with a tick size of a quarter cent and is traded at the Chicago Board of Trade.