An Overview of Grains and Oilseeds
Grains and Oilseeds are renewable resources with continuously fluctuating global supplies that are largely determined by crop production cycles, weather and ongoing shifts in global demand.
Grain and Oilseed futures and options at CME Group provide the ability to manage multiple market scenarios. They allow participants such as producers, grain elevators, merchandisers, food processors, importers and exporters to deal with the price risks associated with the sale or purchase of grains and oilseeds.
In the case of speculators, Grains and Oilseeds provide tools to capitalize on potential profit opportunities. By viewing this module, you will get an overview of the Grain and Oilseed complex at CME Group, and a general idea of how these contracts are structured.
The contracts include futures and options on:
- Three classes of wheat
- Soybeans and soybean byproducts:
- Soybean oil and soybean meal
Chicago Soft Red Winter Wheat was the very first wheat futures contracted listed back in in the 1800s and is based on the wheat primarily used for cookies and pastries. KC Hard Red Winter Wheat represents high protein wheat that is mainly used for baking bread. European Union (EU) Wheat represents the soft milling wheat grown in Europe.
Each Grain and Oilseed futures product is based on a contract size of 5,000 bushels, except for Soybean Oil which is 60,000 pounds, Soybean Meal which is 100 tons and Rough Rice which has a size of 2,000 hundredweight.
Corn, Soybeans, Chicago Soft Red Winter and KC Hard Red Winter Wheat each offer a mini-sized 1,000-bushel contract for those whose needs are better met by a smaller-sized product.
The trading months for each contract are designed to coincide with each commodity’s respective planting and harvest seasons, to ensure that hedgers are able to get protection during those critical periods of the growing seasons.
These benchmark Grain and Oilseed futures are traded electronically via CME Globex, and are physically-delivered.
The Palm Industry
In addition to the benchmark Corn, Soybean and Wheat products, you can also trade contracts on Crude Palm Oil and Crude Palm Olein, which are based on the most widely consumed edible oil in the world.
The palm industry is characterized by continuous production and processing and Crude Palm Oil and Crude Palm Olein Calendar futures allow participants in this market to address the price risk they are exposed to on a daily basis. These contracts are U.S.-dollar denominated and traded on CME Globex. Unlike benchmark Grains and Oilseeds contracts, they are settled in cash rather than through physical delivery.
In 1984, options on Agricultural futures were introduced, which provided an additional risk hedging tool for those looking to manage price risk. Since then, the types of Agricultural options available have grown to include alternatives that provide greater flexibility and opportunities for hedgers and speculators alike.
While Agricultural futures are only traded electronically, Agricultural options are still traded via open outcry on the floor of the exchange, as well as electronically on CME Globex. You can learn more about the various types of options available in the Agricultural options module.
Now that you have an overview of the types of Grains and Oilseeds contracts available at CME Group, check out other modules that will give you examples of how these products are used for trading and risk management.
Test your knowledge
In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.