Commodity – Understanding Wheat Volatility & Food Security

 On 08th March 2022, Chicago wheat futures soared to a record high of $13.634 a bushel, surpassing the high formed during the 2008 food crisis. The price of wheat had risen around 65% since the invasion of Ukraine by Russia on intensifying concern of supply disruptions. It has since then dropped about 24% as other circumstances arose.

This fluctuation in wheat prices gives tremendous opportunities to traders and investors. Before making the most of this opportunity, we must first understand the basic but essential fundamental factors that influence wheat prices, enabling us to make informed trading and investing decisions.

Brief Historical Background:​

For generations, wheat has been one of the most critical food crops cultivated worldwide. There is evidence of wheat production beginning around 10,000 BCE and the Egyptians producing and baking bread over 5,000 years ago.

Wheat today is the second most-consumed grain globally, trailing behind rice. In the farming community, wheat is very favored for its ability to grow in many different climates. Additionally, the crop stays fresh for a long time and has high nutritional value. These facts ensure that wheat will remain an important food staple and a valuable commodity in the foreseeable future.

What are the Major Wheat Varieties?​

Wheat has several varieties, with climate and soil conditions determining the types grown in specific locations. The wheat industry classifies the thousands of varieties available today into six main classes:

1. Hard Red Winter (HRW).

2. Hard Red Spring (HRS).

3. Soft Red Winter (SRS).

4. Durum.

5. Hard White.

6. Soft White.

Spring wheat classes (hard, soft, and durum) are planted in the spring in the spring and harvested in the summer. Winter wheat is sown in the autumn; it lies dormant throughout the winter and grows in the spring, cultivating in the summer months.

Typically, the hard wheat classes (spring and winter) have higher proteins needed to produce the various bread products. Soft wheat, however, contains lower quantities of protein than hard wheat, and it is conducive to producing tender products. The white wheat classes are very desired as they lack a particular red gene in the bran that imparts a darker color and a slightly bitter flavor to the whole grain.

Leading Wheat Producers:

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