A beginner’s guide to wheat: Price, uses & market overview

Explore a thorough overview of the wheat market, learn how it works in simple terms and get to grips with its significance as a popular global commodity.
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Updated: Dec 4, 2023
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On this page, we explore everything you need to know about wheat. Gain insights into wheat market trends, pricing mechanisms, and the environmental impact of wheat. 

Read on to learn more about this popular commodity and find links to beginner friendly guides explaining how you can get involved in wheat. 

What is wheat?

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Wheat is the second most popular grain in the world. Wheat cultivation started over 10,000 years ago. The cereal grain is a food staple for both humans and animals thanks to its high nutrition and ability to be milled into flour. Bread wheat accounts for over 95% of production, while durum wheat is used for pasta and semolina flour. 

Ranking behind only rice and corn in terms of global output, over 800 million tons are produced each year. Advancements in agriculture and demand for wheat-based foods have more than doubled global harvests since the 1960s. The top producers are now the EU, China, India, Russia, and the US.

Wheat market overview

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Like all commodities, the price of wheat can fluctuate sharply and has been done throughout history. Wheat has been a vital crop and food staple for thousands of years. Wheat cultivation and trade have expanded over the past century. 

Wheat is traded on several exchanges around the world which facilitates price discovery and risk management for producers, traders, and mills. Exchanges in the United States and Europe account for much of the global wheat trading volume. 

Many analysts anticipate steady long-term demand growth for wheat as developing nations adopt more wheat-based foods. Advances in agriculture and genetics may also further increase yields going forward. 

Is wheat valuable? 

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Yes, wheat is a valuable commodity and there are numerous reasons why investors are attracted to the market. We have highlighted some of these key fundamentals below, explaining what they are and why they matter.

  • Hedge against inflation. The price of many soft commodities like wheat tends to go up when inflation increases. Inflation is when money loses value over time and results in a higher cost of living. Investing in wheat when inflation rates are on the rise is a good way to protect, or ‘hedge’ against it. 
  • Portfolio diversification. Many investors usually stick to stocks, shares, and bonds. The addition of wheat is an easy way to diversify a portfolio and include a commodity that’s used worldwide. Including wheat allows you to spread your money across different investments, while bolstering your portfolio when the stock market is down. 
  • Currency speculation. A lot of commodities are priced in US dollars and that’s the case for wheat. Analysing the dollar can help time your investment into it because if the dollar is strong, wheat importers will be faced with higher costs pushing its price higher, while a weak dollar would result in cheaper wheat.
  • Global demand. Wheat is widely used around the world for both humans and livestock. Developing countries who have growing populations are expected to increase their consumption of wheat as it’s a relatively cheap grain. Investing in it provides a way to capitalise on population growth. 

How to invest in wheat

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You can invest in wheat by using a commodity trading platform. These platforms offer a range of commodities and are very easy to use. There are different platforms suitable for specific requirements. 

Some let you buy wheat, others let you trade wheat, and many are designed for investing in the grain. Visit our dedicated guide to discover how to invest in wheat.

wheat in your investment portfolio

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A diverse investment portfolio can help protect you during market uncertainty, and the inclusion of wheat can add value while allowing you to spread your money across various markets. 

Wheat often moves independently to traditional investments like stocks and bonds. You can include wheat in your portfolio as a hedge against potential losses. During times of economic uncertainty, investors view commodity grains such as wheat as attractive options. 

Wheat’s long history and the fact it is a food staple for over half the world, makes it a good long term play.

Wheat vs other commodities

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Wheat is an agricultural commodity like rice, corn, and cocoa. Each commodity is unique in its own way and offers different features for investors and traders. You can learn more about specific agricultural commodities using our dedicated guides below. 

  • Corn. Corn is one of the most versatile commodities with many uses, including livestock feed, biofuel, oil, and food. 
  • Rice. Rice is the most popular grain commodity and a staple for half the world’s population 
  • Soybean. Soybean is a major global commodity used for livestock feed and cooking oil.
  • Cocoa. Cocoa is the key ingredient in chocolate and a globally important commodity. 

FAQs

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What are the top wheat-producing countries globally?
How much wheat is used for food consumption versus other applications?
What share of wheat is traded internationally versus consumed locally?
What recent factors have disrupted global wheat markets?
Which nations are the major wheat importers?

Risk disclaimer
Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.