Grain Futures
Wheat is the main grain crop in many countries of the world, the demand for it depends on the consumer preferences in the diet. Usually wheat is used in the country where it is produced, although with the development of world trade and the globalization of international trade volumes grow wheat.
At the present time on American stock exchanges actively traded 3 Grain Futures: Soft Red Winter Wheat (the Chicago Board of Trade), Hard Red Winter Wheat (Kansas City Board of Trade), and Hard Red Spring Wheat (Minneapolis Board of Trade). In the jargon of futures traders, each type of wheat is usually called by the name of the city where he fell, respectively, Chicago, Kansas and Миннеаполисская.
The grade of wheat cultivated in the United States - solid red, or Kansas. It is grown in States such as Kansas, Nebraska, Oklahoma, and Texas. The cold winter and the relatively small amount of precipitation makes these regions ideal for the production of hard red wheat, which is mainly used for baking bread.
Grain Futures on the soft red wheat is the most actively traded wheat futures are traded on the Chicago Board of Trade (CBOT). A soft red wheat are grown in different parts of the USA in Central Texas, closer to the Great Lakes and on the East coast. Soft red requires more humid climate, not suitable for the solid red. Flour made of soft, red is used in the confectionery industry.
Description of the contract Grain Futures
Futures contracts for wheat traded on the Chicago Board of trade (CBOT). The name of the instrument on the stock exchange - WHEAT. The stock symbol - ZW. In the terminal Вгосо trading CFDs on this contract. The full specifications of the contract you can find by clicking on the link.
The volume of one futures contract for wheat is 5,000 bushels. Since бушели are a measure of volume, for each class of grain weight equivalent will be his. For wheat - 136.0775 metric tons.
Quotations of futures indicated in us cents per bushel.
The minimum price increment is ? cents worth of $12.5. Deliverable months for wheat - March, may, July (new harvest), September and December.
The last day of trading in futures contracts for wheat is the working day before the 15th calendar day of the contract month. The last day of delivery is the second business day after the last operational day of the delivery month.
E-Commerce contract starts on Monday night at 03:00 Moscow time and ends at 22:15 on Friday. Within weeks of the instrument traded from 03:00 to 16:15 and 18:30 to 22:15. Every day trades are closed for lunch break at 2 hours and 15 minutes. The питовая trade on the stock exchange, when the contract of the most liquid is from 18:30 to 22:15 Moscow time.
Watch out for the retention of title means. To open the transaction for Grain Futures on your account should be two times more money than will be blocked in the opening is in contrast with instruments of Forex market.
The features of the trade Grain Futures
When trading futures on wheat need to always take into account the dependence of prices on the season. The safest time for performance of transactions - from September to April. As to the other months the prices are moving rather randomly, it is very high risk of loss. Thus, the most attractive for traders will be December and March contract, in the prices of which are clear trends and patterns. Cost of the December contract begins to rise dramatically in September, and the movement continued until mid-October. Thus, this period is a good time for the conclusion of a transaction on the purchase, you can extract the maximum profit from the almost 65% of the annual growth.
With regard to the March contract Grain Futures, the most secure a deal on the sale, and not immediately after the expiration of the previous (December) futures, and at the end of January - beginning of February. It was during this period prices, reaching highs of the year, begin to decline. The deviation from the peaks of up to 50% by the time of the expiration of the contract.
If you are using wheat futures to hedge their risks, the situation may be different. Because this kind of trade is interesting mainly the direct manufacturer and consumers of cereal, then they are mainly insure themselves against unfavourable change of the price at the time of harvest. If he is bad, then the offer will be limited, and the prices will increase sharply, which is beneficial to producers, but bad for the consumers. If he is good, there is a reverse situation - the price drops because of the large supply and producers lose, and consumers, on the contrary, get the goods on more profitable for them price. Thus, both those, and others are trying to insure themselves and to conclude a contract for another stage of the sowing season.
If you are a consumer Grain Futures, and grain you need a spring, it is already in the end of September - beginning of October, buy futures contracts on winter wheat for may delivery. Since you need to insure themselves against the growth of prices for the goods at the time of harvest, the winter fluctuations, which are very well suited for the extraction of speculative profit, you do not worry. For you the main thing - the price at the moment of expiration in the spring. Similarly manufacturers sell these contracts immediately after sowing. As a rule, spring futures on winter wheat is more popular among consumers. This is due to the fact that the probability of a poor harvest and, consequently, a limited supply higher than that of a good harvest. In the winter frosts or late snow and spring flood can destroy all the crops.
Within days of the Grain Futures are trading mostly speculators. Grain market is famous for the fact that the main volume of transactions and the participation of major players is what is happening during the питовой session. In the first half an hour after the opening of these transactions, the volatility, and the opening of the famous big gap. If you prefer to trade in the electronic session, to its completion it is to close all of the transaction, not to get huge losses after the break. At the same time, open transactions on a strong movement at the opening of Pete's not worth it, if you don't know why it happened - the publication of a statement of reserves or data about the bad weather conditions that resulted in the destruction of crops. As a rule, significant fluctuations are explained by a sharp increase in traded volumes, and in half an hour-hour market calms down and is already in a given non-widescreen corridor.
Fundamental factors Grain Futures
The cost of the futures on wheat affect, first of all, the seasonal factors. It is connected with the production of the underlying asset. This cycle - from the smallest certainty with regard to the crop during the planting and early sprouting up all greater certainty in the process of approaching harvest - is reflected in the prices of futures.
Usually the price of futures for wheat at the CBOT is growing at sowing time and reaches a peak immediately after its completion, reflecting the uncertainty of future proposals. After a successful sowing prices begin to fall, as the main stage of the bookmark of the future harvest was left behind.
Rise of prices in April due to fears of late frosts, as well as the lack of rainfall or drought, when wheat begins to колоситься. After that prices are falling in the expectations of the upcoming harvest. After the harvest and the beginning of the sowing campaign in September-October the cycle is repeated.
Understanding the different stages in the production of wheat and the risks associated with them, the futures trader able to make more educated a forecast of price movements. Account of the seasonal factor in trade futures on wheat is a compulsory element of the analysis of this market.
At the same time, the seasonal trends need to be considered from the point of view of other fundamental factors. For example, if the carry-over stocks at the end of the year, the typical seasonal "rally" in the period of sowing may not be so expressed or not be available at all due to the already existing proposal of grain.
On the contrary, the drop in prices after flowering may not happen, if rollovers harvest last year very small. Although seasonal cycles are very stable in the past, specific trade solution should take into account other factors, a more General picture of demand and supply. In other words, it cannot be considered that, if something happened in the past, the same will automatically happen in the future. Understanding the broader fundamental picture, there is a chance to define in time changes on the market, which will strengthen or weaken the seasonal cycles.
Also grain traders are paying close attention to the comes out every Monday Weekly Crop Progress Reports. 11-th of each month goes monthly USDA US and World Supply & Demand Report. In these dates are most likely strong price movements on grain, in particular, and agricultural economic markets in General.
The most unpredictable and dangerous contracts - those against whom comes the grain of the new harvest - for example, the July wheat. Spreads old/new harvest with the participation of these months also have an increased risk, which is reflected in the collateral requirements of the stock exchange.
If we consider the charts of prices of futures on wheat from the point of view of technical analysis, all the patterns are derived from the cycle of production of wheat.
The most diverse trends are the March contract. Immediately after entering into the trade, in December, the prices grow and reach highs of the year, then, closer to the date of expiration, the value of the reduced - sometimes by 50%. In may contracts, on the contrary, immediately after the start of trading trend downward, and nearer to the date of the expiration of the start growing, which can reach 75-80% of the annual growth. In summer and autumn (the June and September contracts) prices are per year lows and in a narrow corridor.
Optional
In addition to the already described us red soft wheat in the U.S. there are also other varieties. For example, Hard Red Spring Wheat (Миннеаполисская) is grown in the Northern States (Montana, Wyoming, North and South Dakota, Idaho), where the winter is too harsh to grow winter wheat, but where there is fertile black soil, and is usually dry and hot weather in the summer. This bond wheat is suitable for milling into flour and is mainly used for baking bread.
The scope of application of one or another of wheat depends on the content of protein. The higher protein content, the harder the wheat. Solid Durum - the most solid of all the varieties of wheat, and contains more than all the protein. Durum is mainly used for cooking spaghetti, noodles, pasta. Because of the high content of protein flour of hard Durum not suitable for baking of bread and confectionery products. In the United States is grown as winter, and spring varieties of Durum - in Michigan, new York, Oregon and other States.
White wheat in the United States of areas sown with less. It is usually used as a substitute for of soft red winter wheat, because the contents of protein and texture of flour is suitable for the same purposes (confectionery products).
Each exchange points in the contract specification particular strain of wheat, which must be placed on the contract. As a rule, there is a possibility to replace the supply of specified in the specification of varieties on the other, with a corresponding discount or premium to the price. For example, the majority of traders in the market of white wheat are used to hedge against the Chicago wheat, and traders solid Durum hedged on Миннеаполисской corn exchange local contract, because the overwhelming majority of the Durum in the United States is grown in the same state of North Dakota.
Spring wheat sown in the spring and harvesting in autumn, so the most popular futures contracts on the variety among hedgers are the September contracts, transactions on which are committed in the spring and in early summer.
Grain imports Algeria, Bangladesh, Chile, Colombia, Indonesia, Iran, Mexico and Sri Lanka provides three-quarters of world trade in wheat. A large share of these imports covered by the United States. In the United States consumed about half of the produced of wheat, and the rest is exported.
