When talking about Wheat futures, it is important to understand that there are three distinct contracts. Not only are the three contracts based on different Wheat products, but each trade at three different exchanges. It’s important to be aware of the contract differences as the price patterns may also differ.
Let’s start with the first exchange formed in the US: the Chicago Board of Trade (CBOT). At the CBOT, now known as the CME Group, the Chicago Wheat futures contract is traded; this is the most actively traded contract of the three. On April 17, 2012, the July 2012 Chicago Wheat contract traded 38,830 times. This contract is also known as Soft Red Winter Wheat. Its name is derived from the fact that the crop is growing during the US winter months. Soft Red Winter Wheat is grown in the South, the Great Lakes region and east to the Atlantic, all of which are more humid environments than other wheat producing regions. The planting season is from mid-August through the end of October. The crop heads in May, and the harvest occurs at the end of May through August. Soft Red Winter Wheat is used to produce flour, the key ingredient for breads, pasta, crackers and many other food products, as well as several industrial products such as starches and adhesives.
At the Kansas City Board of Trade, the KC Wheat futures contract is traded. On April 17, 2012, the July KC Wheat contract traded 9,042 times. This contract is known as Hard Red Winter Wheat which also grows during the US winter months. Hard Red Winter Wheat is the most abundant crop in the US, growing in Nebraska, Kansas, Oklahoma and the Texas panhandle. These regions are ideal for planting due to the cold, subzero winters and general lack of precipitation. The planting season is from mid-August through the end of October. The crop heads in May and the harvest occurs at the end of May through August. Hard Red Winter Wheat’s primary use is in bread making.
Up north, you will find the Minneapolis Grain Exchange where the Minneapolis Wheat contract is traded. On April 17, the July 2012 Minneapolis Wheat contract traded 2,512 times. This contract is also known as Hard Red Spring Wheat. Its name is derived from the fact that the crop is planted in the US spring months. Hard Red Spring Wheat is grown in North and South Dakota, Montana, Wyoming, and Idaho. The winters in the Northern Plains are too severe for winter production. The rich black soil and the dry, hot summers make this region ideal for this crop. The planting season is from April through the end of May. The crop heads in mid-June to July and the harvest occurs mid-July through mid-October. The Hard Red Spring Wheat contract has a higher protein level suitable for milling and is used primarily in breads.
So when talking about Wheat contracts, keep in mind that each contract is referred to by the city in which it is traded. Winter wheat (Chicago and Kansas City) is planted in the winter. Spring wheat (Minneapolis) is planted in the spring. Since the price of the futures contract is heavily based on crop size and weather factors, it is important to know the yearly planting and harvesting schedules of each wheat product.