Wheat Future Prices

A futures contract is a standardized contract that is traded on a futures market. Traders buy and sell futures contracts with either of two intentions. There are individuals that are considered a hedger, such as farmers, assemblers, agricultural input suppliers and so on. A hedger is someone who wants to avoid or at least minimize price risk at all costs (Cheney, 2012). There are also people that are considered a speculator. Recently I have become a speculator within the wheat futures market. Wheat is the fourth-biggest U.S. crop, valued last year at $14.4 billion. (Wilson, 2012) Being a speculator, I was hoping to make a profit by accepting all risks associated with price variations. Personally, as a speculator, I have no interest in the commodity, but I’m attempting to make some money. Speculators generally tend to buy low and sell high but that doesn’t always work out. Speculators accept price risk, opposed to hedgers. As a speculator in the wheat market, I took a huge risk by buying a MAR13 contract of wheat at $9.1650 on November 8, 2012. Although speculators tend to buy low and sell high, price fluctuations are nearly impossible to predict due to many factors. From the beginning of the month, up until I bought a MAR13 contract, I watched wheat prices climb daily. I bought wheat, although it was at a real high price per bushel, because I thought wheat was going to continue to climb for a few more days. If my plan worked out, I was going to sell it in a couple days for a profit, although it may have been only been a small profit. I was then going to wait for something more drastic, because originally I wanted to make a couple round turns, hoping I made a small amount of money after my first MAR13 contract. Overall my plan failed completely as a speculator. They are risk takers, and a huge risk is what I took, although I didn’t buy at a low enough price, I bought at the highest price, hoping the wheat market would continue to struggle and hit extremely high

References: Cheney, Laura. 2012. Decision Making in the Agri-Food System. East Lansing, MI: Dr.Cheney Dreibus, Tony C. 2012. Wheat Futures Drop to Two-Week Low on Slack Demand. Bloomberg website. Nov. 13. http://www.bloomberg.com/news/2012-11-13/wheat-futures-drop-to-two-week-low-on-slack-demand-correct-.html (accessed Nov. 29) Dreibus, Tony C. 2012. Wheat Gains as USDA Expected to Lower Global Stockpiles Forecast. Bloomberg website. Nov. 8. http://www.bloomberg.com/news/2012-11-08/wheat-increases-in-paris-on-signs-of-declining-global-supplies.html (accessed Nov. 12) Weinraub, Mark. 2012. GRAINS-US wheat extends rally on forecasts for tighter supplies. Reuters website. Nov. 7. http://www.reuters.com/article/2012/11/07/markets-grains-idUSL3E8M79JG20121107 (accessed Nov. 23)