Wheat Production, Use, and Transportation

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Overview of Wheat Markets

Wheat History

Chicago Soft Red Winter (SRW) Wheat futures began trading at the Chicago Board of Trade in 1877. The subsequent addition of KC Hard Red Winter (HRW) and European Union Wheat futures has established Chicago as the global center for risk management for this vital commodity, meeting the world’s hedging and trading needs in one central marketplace.

This module provides an overview of the U.S. Wheat cash market, including its production, uses and transportation.

Wheat Production

Wheat has been cultivated around the world for more than seven centuries, and sustains more of the world’s population than any other grain. In the U.S., wheat is the third most-planted crop by acreage after corn and soybeans, with more than 55 metric tons produced each year. While this accounts for only 8% of the world’s wheat production, it still makes the U.S. one of the largest wheat exporters.

U.S. Wheat Imports/Exports

The U.S. share of wheat exports tends to fluctuate. It is impacted by the wheat production in other countries, as well as the value of the U.S. dollar relative to other world currencies. The higher the value of the U.S. dollar, the more it costs users to import U.S. wheat, so the more likely they will turn to other wheat exporting countries.

Wheat is grown in much of the U.S., and the diversity of growing conditions in the country makes it possible to produce many different varieties of wheat, classified by their:

• planting time: winter or spring
• protein content: “hard” for high protein wheat and “soft” for lower protein wheat
• kernel color: red or white

Winter Wheat

Each type of wheat has its own specific use. Winter wheat, which accounts for approximately 70% of the wheat grown in the U.S., is planted from mid-August through October.

Harvest takes place from mid-May to mid-July of the following year, after a dormant period from November to March, hence the name winter wheat.

Hard Red Winter Wheat

Hard red winter wheat, which tends to have high protein content, is the most important class of wheat produced in the U.S. It is primarily used for pan bread, general purpose flour, hard rolls, flat breads and cereal. It is grown throughout the high plains with major production in Kansas, Nebraska, Oklahoma and the Texas panhandle. 

These areas typically have significant periods of subzero temperatures in winter but also snow covering, which winter wheat depends on for successful development.

Soft Red Winter Wheat

Soft red winter wheat, is produced in central Texas and northeastward to the Great Lakes and east to the Atlantic coast. Its baking qualities make it a top choice for making cakes, cookies and other pastries.

Hard Red Spring Wheat

Hard red spring wheat is mostly grown in north central states, such as North Dakota and Minnesota, where the winters are too severe for winter wheat production. The hot, dry summers are an important factor in the production of this high-grade wheat.

Spring wheat planting takes place from April through May, with harvest occurring from mid-August to mid-September.

Other Wheat

Hard red spring wheat is used for croissants, bagels and pizza crust. Other wheat classes include soft white, grown primarily in the Pacific Northwest, used for baking more exquisite types of cakes and pastries and Asian-style noodles, and durum wheat, which is mainly produced in North Dakota and contains the highest percentage of protein of any wheat variety. Durum wheat is mainly used in the production of pasta.

From Farm to Bakery

Wheat transportation takes place via truck, rail, ocean vessel, or barge. Shippers use one or more of these modes of transportation along the way. But the primary conveyance is rail, regardless of whether the wheat is targeted for domestic use or for export. Because wheat must often be transported over long distances to get to milling locations or to river ports, rail tends to be a less expensive mode of transportation.

However, truck remains the major mode of transportation for wheat moving from a farmer’s field to a country grain elevator. Wheat is exported from the U.S. through ports in the Pacific Northwest, the Texas Gulf and the Mississippi Gulf. The cost of ocean freight from the Gulfs versus the Pacific Northwest plays a role in the decision shippers make when choosing the port for exporting wheat. 

Ultimately, due to where it is produced, soft red winter wheat is exported predominately through the Mississippi Gulf, hard red winter predominately through the Texas Gulf, soft white wheat predominately through the Pacific Northwest, and spring and durum wheat split between the Mississippi Gulf and Pacific Northwest.

Most wheat is milled into flour; sometimes in domestic mills and other times in foreign mills. Once wheat arrives at a mill, it is inspected and loaded into large bins or silos until it is time for it be processed into flour, and eventually into baked goods for food.  

At every stage of the wheat production chain, from planting, growing and harvest, to exporting, milling and baking, each market participant faces the risk of adverse price movements caused by the vagaries of the market and supply and demand.

Chicago Soft Red Winter and KC Hard Red Winter futures and options, as well as European Union Wheat contracts, provide a means to manage this risk as well as to take advantage of potential profit opportunities.