In this article we look at how to invest in wheat. We also look at the commodity wheat and at the potential of investments in wheat. You will quickly learn how you can invest in wheat via the internet!
What is wheat?
Most people already know that wheat is a type of grain; it is one of the most cultivated types of grain in the world. This naturally results in a lot of supply, which can also be seen in consumption. Wheat and corn are the most consumed grains in the world. Yet wheat offers a huge amount of variety.
Wheat can be divided into different types: winter wheat, summer wheat and transition wheat. These names refer to the period in which the crop is sown. The wheat that is eaten in the United Kingdom is not solemly grown here. In fact, it is largely from China, the US and Russia.
What determines the price of wheat?
Wheat is a commodity that is almost always in demand. This is because we use wheat for many different products and people will always be hungry. The chance that the demand for wheat suddenly decreases tremendously is therefore quite small. Trading in wheat will therefore continue in the long term.
The price of wheat is therefore mainly determined on the supply side. For example, a failed harvest can lead to a sharp increase in wheat prices. It may therefore be wise to study how the harvest is going in the main wheat-producing countries.
How can you invest in wheat?
Directly investing in wheat
When we talk about directly investing in wheat, we are not talking about physically buying large quantities of wheat. It actually involves directly trading in futures or contracts on the commodity wheat. The storage of wheat is then not necessary. In fact, you do not actually invest in the wheat itself but rather in the price of wheat. Thus, no one can demand that you deliver the commodity and you do not buy wheat, but merely contracts on the wheat itself.
By taking proper account of the underlying factors, you can earn money from investing in wheat. It is therefore particularly important to keep an eye on the supply side of the market. In the case of bad news about the wheat harvest, it is wise to buy wheat because a bad harvest is likely to push up the price.
When good news comes out, you should go short. You earn money at a falling wheat rate. You can easily invest money in wheat through an online broker. Click here to directly open an account with an online broker >>
Indirectly investing in wheat
It is also possible to invest indirectly in wheat. Here, too, we are not talking about a physical purchase of, for example, a loaf of bread that happens to contain wheat. Instead, for example, this can be an investment in an index fund that closely follows the wheat price. You can also buy wheat stocks in a company that is heavily involved in the processing of wheat into products. Please note that in the latter case the characteristics of the company also play a role.
Some tips for investments in wheat
It is now clear that the price of wheat is mostly determined on the supply side of the market. It is therefore also wise to carefully analyse the supply side of the market and to make a move only when there is an indication that something exceptionally bad or good is happening with the harvest.
In the long term, demand for wheat is likely to continue to grow. After all, the world population is still rising and as a result there will be more and more hungry people who need to be fed. Nevertheless, developments in the agricultural market can simplify the cultivation of wheat so that a higher supply can be achieved with fewer resources.