Wheat has come to become one of the many major agricultural commodities available in the world and continues to garner popularity across the world. This popularity can be attributed to wheat being a primary food staple in some countries such as North Africa and the Middle East. This furthers bolsters the importance wheat has for both developed countries and emerging markets.
Thanks to the wide uses it plays in the production of food, wheat has the potential to hedge against inflation. Meaning there are myriad of options available for investors who are looking to engage in the wheat market.
Movers of Wheat Prices
Much like every other commodity in the market, wheat has its own factors that have an impact on its prices. Below are some important factors that affect and determine the direction of wheat prices.
The state of a countries economy plays in important role in determining the price of wheat. There exists a correlation between the two. This can be observed during times of economic debilitation, wheat prices are said to also drop. But as soon as the economy recovers, wheat prices simultaneously rise back up. This is why investors should constantly keep track of economic data when determining the direction of wheat prices.
As mentioned earlier, wheat has the potential attribute to aid against inflation. Although this is not a hundred percent guaranteed, there exists historical data that dictates how wheat prices have the tendency to move in accordance to the rate of inflation.
Just like economic data, it would be helpful to investors if they keep track on inflation’s outlook since it would provide basis for any further analysis.
Because it is an agricultural commodity by nature, weather can also be a turning point for wheat prices. The most prominent weather that impacts wheat prices is drought. During forecasts of approaching drought, prices have the tendency to go up due to this weather climate straining growth. Another would be cold weather and floods which have the potential to threaten supplies.