Wheat is one of the most important agricultural commodities, serving as the basis for global food security. According to data from the USDA (United States Department of Agriculture), this crop is the second largest in the world in terms of cultivated area and total production volume. In the 2024/2025 harvest, for example, wheat produced on the planet reached almost 797 million tons, second only to corn (1.2 billion tons).
In addition to its importance in the food market, wheat plays a major role in the world’s agricultural economy. As a commodity, its price is volatile. Therefore, climatic, geopolitical and even logistical factors directly influence the formation of wheat’s value, both in the field and on international stock exchanges.
In this article, we’ll explore how the price of wheat is formed, as well as ways to mitigate the risks associated with the volatility of this market. Have a good read!
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The first phase of pricing wheat begins while it is still being grown, since the value varies according to the quality of the grain. Specific characteristics play a fundamental role in pricing and also have a direct impact on the type of end product it can be used to produce, such as flour for baking, pasta or cookies.
The Brazilian Agricultural Research Corporation (Embrapa) describes the methods used to evaluate the quality of wheat in Brazil. The criteria include:
These analyses follow strict methodologies that set standards for each of the variables. In addition to quality, other factors directly influence the price paid to producers:
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In addition to the factors that influence the price paid to farmers, there are also variables that alter the value of wheat on the commodities market. See and understand each one below:
Large harvests in wheat-producing regions (such as Russia, Ukraine or the United States) can lead to a drop in wheat prices on the international market. However, weather problems, wars or trade embargoes can affect wheat production and logistics, limiting supply and boosting prices.
Agricultural production depends on the weather. Phenomena such as El Niño and La Niña directly affect crop yields. In addition, severe droughts, excessive rainfall and even snow cover can compromise the productivity and quality of wheat and other grains, altering the balance between supply and demand.
The stocks of the main producing countries act as reserves for the market. These stocks are used to guarantee availability and “hold down” prices when supply falls. However, low stocks can increase market sensitivity and price volatility.
Wheat is a commodity, i.e. traded internationally and priced mainly in dollars. As such, any appreciation or devaluation of the US currency has an impact on local prices. A strong dollar tends to make wheat more expensive for importing countries, which can reduce demand. A weaker dollar facilitates exports and increases demand for the product.
Futures exchanges such as the Chicago Board of Trade (CBOT) are major price setters for wheat. The contracts traded there indicate expectations regarding supply, demand, climate and the geopolitical scenario. For this reason, any speculative movement in this market also has an impact on the formation of international prices.
Inflation, interest rates, global economic growth and international conflicts directly influence the wheat trade. A recent example is the war between Russia and Ukraine, two of the largest global exporters, which has destabilized trade flows and impacted prices.
It’s not just wheat that is impacted by these macroeconomic factors. Other agricultural products and commodities are also priced according to the market. That’s why volatility is part of this segment and financial solutions are used to manage the risks that these fluctuating values pose to farmers, importers, exporters and more.
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As we’ve seen in this article, the prices of wheat and other agricultural commodities fluctuate according to supply, demand and more. It is against this backdrop that hedging products become necessary, especially in the midst of weather uncertainties and currency fluctuations.
By using financial instruments such as futures contracts and options, producers, cooperatives and industries can lock in prices in advance, protecting themselves from stock market fluctuations. At Hedgepoint Global Markets, you’ll find numerous hedging specialists with a focus on the agricultural market. Get in touch and find out more about these advantages!
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