Wheat trading: what is it and how does it work?
Despite taking repeated blows in the market recently, experts predict a rise in wheat prices, due to current global uncertainty. Read on to learn how you can grain up your portfolio by getting exposure to wheat prices.
What’s on this page?
What is wheat trading?
Wheat trading is the act of speculating on the upward or downward price movements of wheat without taking actual ownership of the underlying commodity. You can trade upward and downward price movements.
Wheat is classified as a soft commodity because it’s a naturally occurring raw material that’s grown, harvested and processed for human consumption. This is unlike hard commodities, which are mined or extracted from the earth and used in manufacturing.
Commodities are mass-produced and the pricing is standardised – meaning it remains the same the world over. Like all other stocks, commodities are bought and sold over dedicated exchanges.
The only difference, however, is that commodities can be bought and sold at current or future prices – a key factor to consider for traders who want to add wheat to their portfolios. Other factors that could have an impact on wheat prices include breaking news or political events, seasonal cycles and weather.
How to trade in wheat
With us, you can start trading in wheat via CFDs. CFDs are a popular choice if you’re looking for leveraged, short-term exposure to wheat price movements without taking ownership of the underlying asset. You can trade wheat on the spot, or get exposure via futures or options.
To get started, follow these simple steps:
- Create a commodity trading account
- Find out how wheat trading works
- Identify your opportunity
- Take a position
- Monitor your trade
Wheat futures are contracts that enable traders to place leveraged bets on the commodity for a fixed price at a pre-determined date in the future.
By entering into the contract, both the buyer and seller are obligated to either buy or sell on or before its expiry date.
To start trading wheat futures with us via CFDs, follow the steps below:
- Create an account
- Learn how to trade futures
- Pick wheat commodity futures
- Decide if you want to go long or short
- Take your first position
- Remember to set your stops and limits
- Monitor your trade
Wheat options are contracts that give you the flexibility to trade wheat without the obligation to buy or sell at the underlying asset at a set price within a set timeframe. With CFDs, you can gain exposure to wheat prices while paying zero commission as the fee is already included in the spread.
Here’s how you can start trading wheat options today:
- Create an account
- Learn how options trading works
- Pick wheat commodity options
- Decide if you want to buy or sell options
- Choose your strategy
- Open your first trade
- Monitor your trade
Is wheat a good opportunity?
Wheat commodities remain a popular investment, especially in times of economic and market uncertainty, where they’re seen as an inflation hedge against the US dollar, as they’re priced in USD. So, if dollar performance weakens, inflation often rises, which boosts wheat prices.
Grain markets, a growing performance?
Although the Russia-Ukraine conflict’s caused turmoil to global markets, wheat commodities, in particular, took a hard hit. This is because both Russia and Ukraine (who account for close to a third of all global exports) seized production, sparking fear of possible food shortage.
Despite the chaos caused by the conflict, demand for wheat is predicted to increase over the years. This is due to its diverse use as a source of food for both human and animal consumption, as well as the ease with which it grows, compared to other grains.1
While wheat commodity prices may have dropped sharply over recent months, they still remain 30% higher than before the Russian conflict put a halt to most European exports. Although the discord’s caused great disruption to European exports, it’s opened up opportunities for other emerging markets like India, whose pricing is seen as more competitive than the current high global prices caused by the current shortage.2
Wheat trading summed up
- Wheat trading involves speculating on the price of wheat without taking actual ownership of the underlying asset or commodity
- In times of economic or market uncertainty, wheat commodities are a good hedge against a weak dollar
- The demand for wheat commodities is predicted to increase over the years
- With us, you can trade in wheat via CFD trading
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1
- Wide range of popular and niche metals, energies and softs
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1In the case of all DFBs, there is a fixed expiry at some point in the future.
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