US Wheat Futures


Wheat futures are a type of derivative based off of the value of wheat. The price of wheat is determined by the supply and demand on Wall Street. There are many factors that can affect the price of the commodity, such as new exports or snow storms in Canada and Russia that destroy crops. Wheat is used in a variety of ways throughout the world such as food and cattle feed.

More About US Wheat Futures

Continue reading to learn more about:

What is wheat's future?
How do you trade wheat futures?
How do you read a wheat futures price?
What is a future contract?
How many bushels are in a wheat futures contract?


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What is wheat's future?


A wheat future is a contract that gives the buyer the right to purchase a fixed amount of wheat at a specified price (the future price) at some point in the future. The seller of the wheat future is obligated to deliver wheat to the buyer if the buyer chooses to exercise his right to do so.


 
 

How do you trade wheat futures?


If you are wondering how to trade wheat futures, the process is quite similar to any other commodity futures contract. Most futures brokers and market makers support the option of trading wheat on a margin, which is a great way to give your initial investments a bit of a boost.

 

How do you read a wheat futures price?

A wheat futures price isn't for a physical product, but an agreement to deliver one in the future at a certain price. In other words, it's a way to hedge your bets on whether the price of wheat will rise or fall. Many actual wheat producers, including farmers and flour mills, use wheat futures to protect themselves from market volatility.

So how do they work?

To see what you could expect to pay if you wanted to buy a delivery of wheat, you'd look at the bid price (what someone is willing to sell a contract for). If you wanted to know how much you could make from selling a delivery of wheat, the ask price would be more useful (what someone is willing to buy along with some information about current and upcoming harvest supplies in various regions.
 
  • What is a future contract?

    A futures contract is a standardized contract, exchanged on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.
  • How many bushels are in a wheat futures contract?

    If you want to trade a commodity futures contract on wheat, it means that you agree to buy a specified quantity of wheat - 5,000 bushels for example. A generic futures contract is always for a standardized amount of the underlying commodity or security. In this case wheat's standardized delivery unit is 5,000 bushels. You can think of trading a full-sized contract (5,000 bushels) as similar to buying the total in one place instead of five "bushel" lots in five different cities.