Commodities: Wheat

Domestic wheat was first seen in southwest Asia, in what is now called the Fertile Crescent. Archaeological evidence shows that wheat cultivation began at least 9.000 years ago in Syria, Jordan, Turkey, Armenia and Iraq. Today, wheat is one of the world’s most important agricultural commodities. About two-thirds of global production is for food consumption, with much of the rest used for livestock feed.

Contract Specifications

Production

Wheat is milled into flour, which is used to make a variety of foods including bread, pasta, cake and other baked goods. Wheat is grown on more land area worldwide than any other crop, and is behind only corn and rice in total production. Due to its versatility, wheat is harvested somewhere in the world every month of the year. Top producing areas include the European Union, China, India, Russia, the U.S., Australia and Canada.            

Price Drivers

Wheat prices tend to experience significant volatility due to supply-chain disruptions caused by extreme weather and natural disasters. Other factors that influence price include:

• import/export restrictions
• interest rates
• substitution effect
• energy costs
• the strength of the U.S. dollar
• stock levels (inventories)