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WIKI ANALYSIS
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This article describes a commodity traded on a commodities exchange. View articles referencing this commodity. |
This article describes a specific commodity. For grains prices in general, see the article on Grains Prices. For specific futures contracts, see the below section on wheat futures contracts.
Wheat is a commodity input that goes into many food products, from pasta to bread to baked sweets. Wheat futures on Chicago's commodities exchange more than doubled in September 2007 compared to the previous year, going from $3.95 a bushel to nearly $9. What's driving up wheat prices is a matter of simple supply and demand, as bad weather, including a spate of hurricanes, have created shortages of this important grain.
A more fundamental problem compounding the recent effects of bad weather is that farmers are increasingly switching to grow corn because of the skyrocketing demand for the ethanol-producing grain.
The chart at left shows continuous front-month futures contracts for Wheat traded on the Chicago Board of Trade (CBOT) in cents per bushel.
Map of Where Wheat is Produced
Companies Suffering from Rising Wheat Prices
Wheat is a truly global commodity input, as it is used for bread and pasta in Western countries and noodles in Asian countries. When wheat prices rise, companies are faced with the dilemma of taking a hit to gross margins or passing on cost increases to the consumer, which often decreases demand.
- Sara Lee (NYSE:SLE) and Campbell Soup (NYSE:CPB) are both producers of baked goods, especially bread. Wheat flour is the main ingredient in most baked goods. Sara Lee had acquired instruments to hedge against rising wheat prices, but prices rose above expected increases.
- Kellogg (NYSE:K), General Mills (NYSE:GIS), Kraft Foods (NYSE:KFT), PepsiCo's (NYSE:PEP) Quaker Foods, and Nestle (Public, VTX:NESN) are all major producers of breakfast cereals, most of which are made partly from wheat.
- Kraft Foods and PepsiCo's Frito-Lay are the largest multinational snack companies. Many of the products manufactured by these companies, including corn chips, cookies, and crackers, are made primarily of grain products.
Japanese Companies
- Nisshin Seifun Group (JP:2002) and Yamazaki Baking (JP:2212) are considering raising prices for consumers to offset increases in wheat prices
- Nissin Food Products (JP:2897) may raise prices on its popular noodle products for the first time in 17 years because of wheat price hikes
Wheat Futures Contracts
See Also
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