Wheat Skyrockets to Fresh Records
Wheat prices have rocketed in recent weeks as supplies continue to dwindle, while market analysts have been baffled by the latest swing in the Chicago Board of Trade wheat futures – the largest in the 160-year history of the market.
Unprecedented levels of volatility in the US wheat markets have seen Chicago Wheat trade in a range of nearly US$2.70 in one day on Wednesday 27 February, sparking concern and frustration among traders - up until two weeks ago, the market's normal daily trading limit was only 30 cents.
Chicago Wheat hit more than US$13 a bushel after first plunging 11% then rising 20% following choppy trading on Wednesday. Overall, prices are up 44% so far in 2008, following on from last year's increase of 77%.
And much of this volatility is down to a range of global factors, including:
- World wheat stockpiles at their lowest for 30 years, forcing prices up
- Increasing orders from foreign markets including South Korea, Taiwan, Mexico, Nigeria and Venezuela
- Spiralling oil prices
- Trade rules and tariffs
Extreme weather in some wheat producing countries, such as droughts in northern China, have affected production levels and driven the price of the remaining wheat up. Meanwhile, Kazakhstan's announcement this week that some 110 million bushels of wheat would now have tariffs assigned to them, in order to curb sales, has added to the increasing concern over the market.
Back your views with IG Markets
Are rising wheat prices likely to continue or will stock levels recover, forcing prices back down? We offer contracts on Paris Milling Wheat, Chicago Wheat and London Wheat, allowing you to go long or short on the market of your choice.
There is no commission on our commodity contracts - all you pay is the dealing spread. Our spread for Milling Wheat is 1 point, for London Wheat 0.5 points, and for Chicago Wheat 2 points.
The volatility of these markets offers a unique opportunity for traders, with commodities often making sharp and sudden moves.
For more information our commodities contracts, click here.
Meanwhile – with both Standard and Mini contracts available – you can take far smaller positions on commodities than are normally possible in underlying futures contracts.
And with IG Markets it is possible to include a Guaranteed Stop, which allows an added level of security and protect you against adverse changes in the market.
Our Guaranteed Stops put an absolute limit on your liability should the market move against you, for a one-off extra charge.
The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.
03/03/08