Understand how the price of wheat is formed

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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• Understand how the price of coffee is formed 

Factors that influence the price of wheat paid to producers 

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: 

• Gluten content: indicates the amount of gluten-forming proteins in the flour. These proteins are responsible for the functional properties of wheat flour. 
• Hectolitre weight: this is influenced by the uniformity, shape, density, size of the grain and the presence of impurities or broken grains, and is an indication of the health of the grain. 
• Falling number: measures the enzymatic activity of the grains and is important for assessing wheat germination. 
• Moisture, impurities and damaged grains: these influence the preservation and processing of the grain. 

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: 

• Geographical location: more isolated regions tend to receive lower prices due to logistics and infrastructure
• Regional supply and demand: excess production in one place can put downward pressure on producer prices. On the other hand, a shortage tends to push them up. 
• Transportation and storage costs: variables that also influence the net value received by the producer. Higher or lower costs are reflected in the final value. 
• Agricultural policy: some producers receive subsidies, price guarantee programs and more. These policies can control the amounts received by the farmer. 

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• Hedging: an essential strategy to protect farmers from volatility 

Main influencers of wheat prices on the global market 

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: 

●    Supply and demand 

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. 

●    Weather 

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.

●    Global stocks 

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.  

●    Exchange rate 

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 markets 

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. 

●    Macroeconomic and geopolitical factors 

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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• The importance of hedge diversification in the commodities market 

How to manage the risks of volatility? 

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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• Hedgepoint Market Calls: strategic information for intelligent decisions 

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