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The main variety
of Wheat grown in the United States and the world is winter wheat. This
variety of wheat is aptly named because it is planted in the fall, lies
dormant during the winter and is harvested in the late spring or early
summer.
Unlike the other
grains, the United States is not a major producer of Wheat (5th
ranked worldwide). However, the U.S. is still a net exporter.
* Past performance is not
necessarily indicative of future results. See disclaimer on Page 2 for
further details.
The major periods of
risk for the winter wheat crop are planting and harvest. Planting typically
begins in October and as such the market builds a premium into prices in the
months preceding in anticipation. August and September are the two
strongest months historically.
Following planting,
prices tend to decline as the market is flush with supply from the previous
harvest and the crop is dormant. This is accelerated at the beginning of
the calendar year, as crop sales (marketings) increase and transportation
problems weigh on prices. 15 times during the 1987 to 2006 period, March
CBOT Wheat futures have declined in February, making it the only member of
the grain futures to suffer from the fabled “February Break.”
Harvest usually begins
in May. Hence, April tends towards strength as supplies are low, the crop
is heading and the market worries about harvest. The height of harvest is
June, which by coincidence also happens to be the worst performing month.
As harvest draws to a close, prices begin to recover and start anticipating
planting woes and future supply concerns, thus beginning the cycle fresh
again. |
