Wheat
Wheat is a global staple with several classes and many exporting countries. Learn Chicago and Kansas City wheat futures, the Black Sea's role and price drivers.
Wheat is one of the world's most important food crops, used for bread, pasta, noodles and animal feed. Unlike corn, which is dominated by a few exporters, wheat is grown on every inhabited continent and traded by many countries, with Russia, the European Union, Canada, Australia, the US, Ukraine and Argentina among the largest exporters. Because wheat is a staple food, governments often intervene in its trade, which makes politics a major price driver.
Classes of wheat#
| Class | Main use | US futures |
|---|---|---|
| Soft red winter (SRW) | Cakes, cookies, crackers | CBOT Chicago wheat (ZW) |
| Hard red winter (HRW) | Bread flour | CBOT Kansas City wheat (KE) |
| Hard red spring (HRS) | High protein bread flour | MIAX Futures (formerly Minneapolis Grain Exchange) |
| Durum | Pasta | Mainly cash markets |
| Milling wheat (Europe) | Bread and baking | Euronext milling wheat |
Each futures contract is 5,000 bushels, quoted in cents per bushel, with a tick of 1/4 cent ($12.50).
Winter and spring wheat#
- Winter wheat is planted in autumn, goes dormant over winter and is harvested in early summer. Weather risks include winterkill and spring drought in the Plains.
- Spring wheat is planted in spring and harvested in late summer, mainly in the northern US and Canada.
Global supply and the Black Sea#
Russia has become the world's largest wheat exporter, and Ukraine was a major exporter before 2022. Together, the Black Sea region has accounted for a large share of global wheat exports.
What moves wheat prices#
| Driver | Example |
|---|---|
| Weather in major exporters | Drought in the US Plains, Russia, Australia or Argentina |
| Export policy | Russia's 2010 export ban; Russian export taxes and quotas; India's 2022 export ban |
| Geopolitics | Black Sea conflict, shipping routes |
| Global stocks | China holds a large share of world wheat stocks |
| Currency moves | A weaker rouble or euro boosts competitors' exports |
| Corn prices | Wheat competes with corn in animal feed. See Corn |
| Quality | Protein levels and disease affect premiums between classes |
Spreads in wheat#
- Kansas City vs Chicago (KC minus Chicago): reflects hard vs soft wheat quality premiums and regional supply. See Futures Spreads Explained.
- Wheat vs corn: when wheat is cheap relative to corn, more wheat goes into animal feed.
- Old crop vs new crop calendar spreads around harvest. See Calendar Spreads in Futures.
Wheat and food security#
Many countries in the Middle East and North Africa depend heavily on wheat imports. Large price spikes can strain government budgets that subsidise bread, and high food prices have been linked to social unrest, including during the 2010 to 2011 period. Governments therefore watch wheat markets closely.
Trading considerations#
- Multiple contracts: choose the class and exchange that matches your view and liquidity needs.
- Policy headlines can move prices sharply overnight.
- Seasonality: harvest pressure in early summer for winter wheat. See Seasonality in Commodities.
- Limit moves during supply shocks.
Frequently asked questions#
What is the difference between Chicago and Kansas City wheat?#
Chicago futures are based on soft red winter wheat used in cakes and crackers; Kansas City futures are based on hard red winter wheat used in bread.
Who are the largest wheat exporters?#
Russia, the European Union, Canada, Australia, the US, Ukraine and Argentina are among the largest.
Why did wheat prices spike in 2022?#
Russia's invasion of Ukraine disrupted Black Sea exports, which supply a large share of world wheat trade.
Next, learn about the leading oilseed in Soybeans.
3 quick questions on this lesson. Get them all right to finish it.
Turn on JavaScript to take the quiz.