Wheat traders have used the Chicago Soft Red Winter Wheat futures contract to source liquidity for 140 years. What many are beginning to notice is that there is another, deeply liquid wheat contract, KC Hard Red Winter Wheat, that is growing at a faster rate than any CME Group grain and oilseed benchmark product.
Just prior to harvest in 2016, Open Interest was 64% higher than it was just two years prior in 2014.
The once static KC-Chicago Wheat spread has reached historical extremes as of late.
Among major grain and oilseed crops, wheat is the most vulnerable to adverse weather, due to the differing geographical area in which it is grown and its adaptation as a winter crop. During the fall when the plant is young, wheat goes through a process called "cold hardening" to fend off injury during the cold winter temperatures. Once it comes out of dormancy and begins growing in the Spring, wheat has little resistance to low temperatures which tends to cause volatile price movements.
As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.
Follow us for global economic and financial news.