Wheat: Trading
How wheat became the world's first futures contract
How wheat became the world's first futures contract What this tab covers How and where it is bought and sold: who buys and sells, exchanges and benchmarks, contract types, the big trading houses and how prices are discovered.Wheat was the first futures contract, trading on the CBOT from around 1850 (Geman, pdf p. 161). Today CME lists Chicago soft red winter and Kansas City hard red winter; Minneapolis lists hard red spring. Euronext milling wheat in Paris is the benchmark for EU and Black Sea grain. Physical sales are quoted as premiums over these futures by class, protein and origin. Large importers such as Egypt and Algeria buy through state tenders. In 2010 Glencore bet on rising wheat prices while the heads of its Russian unit publicly backed an export ban (Blas & Farchy, pdf p. 236).
Where it is bought (buyers)
- State tenders: Egypt (Mostakbal Misr), Algeria (OAIC), Saudi Arabia (GFSA), Japan (MAFF weekly tenders), Jordan, Tunisia
- Private flour millers in Indonesia, the Philippines, Turkey, Nigeria, Bangladesh and the EU buy cargoes from traders
- China's COFCO and Sinograin buy within China's 9.636 Mt tariff-rate quota
- In India, the FCI buys from farmers at MSP; private millers buy at mandis and from FCI open-market sales
Where it is sold (sellers)
- Russia (via Novorossiysk and other Black Sea ports)
- EU (France, Romania, Germany)
- Canada and the US (Pacific Northwest and Gulf ports)
- Australia (CBH, GrainCorp ports)
- Argentina and Ukraine
Exchanges and benchmarks
| Venue | Contract | Notes |
|---|---|---|
| CME Group CBOT | Soft red winter wheat, 5,000 bushels | most liquid world wheat future |
| CME Group (Kansas City) | Hard red winter wheat, 5,000 bushels | bread wheat benchmark |
| MIAX Futures (formerly MGEX) | Hard red spring wheat, 5,000 bushels | high-protein wheat |
| Euronext Paris | Milling wheat No. 2, 50 t | benchmark for EU and Black Sea grain |
| Zhengzhou Commodity Exchange | Strong gluten wheat | thinly traded |
| NCDEX (India) | Wheat futures | suspended by SEBI from December 2021 (suspension repeatedly extended) |
Contract types
- FOB cargoes priced as a basis over CBOT, KC or Euronext futures
- State tender awards on a CIF or C&F basis
- Forward contracts with farmers and co-operatives
- Government procurement at fixed MSP (India) or minimum purchase price (China)
Top trading houses
- Cargill
- ADM
- Bunge (with Viterra)
- Louis Dreyfus
- COFCO International
- Olam Agri
How prices are discovered
- CME and Euronext futures
- Price agencies: S&P Global Commodity Insights, Argus, Fastmarkets Agricensus, IKAR
- Importer tender results
- USDA WASDE and IGC Grain Market Report