If it had not been for Wheat, human beings may never have socially and culturally developed as cosmopolitan as we have. Wheat was the first crop to be cultivated on a grand scale and stored long-term, enabling the start of city-based societies and the dawning of civilization.
Wheat is a cereal grass, but before cultivation it was a wild grass. Wheat is believed to have originated in southwestern Asia. Archeological research indicates that Wheat was grown as a crop in the Nile Valley about 5,000 BC. Wheat is not native to the U.S. and was first grown here in 1602 near the Massachusetts coast.
When Wheat is traded at the commodity exchanges it must be classified into very specific classes according to grain properties. The Minneapolis Wheat contract, also known as Hard Red Spring Wheat, is planted during the US spring months. Hard Red Spring Wheat is grown in North and South Dakota, Montana, Wyoming, and Idaho. The winters in the Northern Plains are too severe for winter production. The rich black soil and the dry, hot summers make this region ideal for this crop. The planting season is from April through the end of May. The crop heads in mid-June to July and the harvest occurs mid-July through mid-October. The Hard Red Spring Wheat contract has a higher protein level suitable for milling and is used primarily in breads.
Minneapolis Wheat futures provide a way to effectively manage the global price risk that Wheat merchandisers, producers, food processors, livestock operations, importers and others have related to the purchase or sale of Wheat. Futures contracts provide opportunities to identify short and long-term cyclical price and volatility patterns. Minneapolis Wheat futures traders are able to take advantage of arbitrage and spread opportunities with other commodities, including related grains, oilseeds and livestock.
The Minneapolis Wheat contract trades at the Chicago Board of Trade (CBOT), now part of the CME Group, after a strategic partnership with the Minneapolis Grain Exchange (MGEX). The electronic futures contract trades on Globex from 7:00 PM CT to 7:45 AM Sunday through Friday, as well as the primary hours of 8:30 AM CT to 1:30 PM Monday through Friday.
One Minneapolis Wheat futures contract is 5,000 bushels, or approximately 136 metric tons. The previous settlement price (November 5, 2015) for December 2015 Minneapolis Wheat futures was 516’2, or $25,812.50 per contract. That reads as five dollars and sixteen and a quarter cents. The most common contract symbol is MWE.
One futures contract price increment or “tick” is ¼ cents per bushel. A one “tick” move is $12.50. The next tick after 516’2 upward is 516’4 followed by 516’6. Therefore, a one-cent move from 516’2 to 517’2 is $50.
The performance bond or initial margin requirement to initiate one futures contract is $1,820 (as of November 11, 2015). To control that futures contract going forward the maintenance margin becomes $1,400 (as of November 11, 2015).
The Daily Price limit is $.60 per bushel or $3,000 per contract for every other month. There is no limit for the spot month. Limits are subject to change per the MGEX Rulebook.
The futures contract month listings are March (H), May (K), July (N), September (U), and December (Z). “New crop” refers to the December futures contract as that is the month in which Hard Red Spring Wheat in the ground was harvested. “Old crop” refers to the tradable contracts covering the past year’s crop.
The futures contract’s Last Trading Day (LTD) is the business day preceding the fifteenth calendar day of that contract month. The December 2015 Minneapolis Wheat futures contract LTD is December 14, 2015 for example. The First Notice Day (FND) for that same contract is November 30, 2015.
Significant fundamental reports to be aware of are the United States Department of Agriculture (USDA) Crop Progress reports, typically released at 3:00 PM CT on Monday’s, and the periodic Crop Production and USDA Supply/Demand reports, released at 11:00 AM CT.
Visit www.danielstrading.com for additional contract specifications and market information regarding the Wheat futures market.
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