Wheat: What’s The Impact of the US Dollar & Other Price Drivers on Its Value?


Where Is Wheat Grown & Why Is It So Important to the World's Economy?
Last Updated:
Disclosure: Your support helps keep Commodity.com running! We earn a referral fee for some brokers & services we list on this page. Learn more...

In this guide to understanding wheat as a commodity, we’ll explain why it’s valuable, describe how it’s produced, and list what it’s used for. We also list the countries that produce the most wheat and explain what drives its price.

Interested in how wheat is traded? See our full guide, or if you want to get started trading right now, here are options available in to consider:

Disclaimer: Availability subject to regulations.
Between 53.00%-89.00% of retail investor accounts lose money when trading CFDs.

Why Is Wheat Valuable?

For centuries, wheat has been one of the most important food crops cultivated by civilizations around the world. Evidence shows that wheat production began around 10,000 BC, and that the Egyptians produced and baked breads in ovens over 5,000 years ago.

Today wheat ranks as the second most consumed grain in the world, trailing only rice in annual consumption.

Farmers can easily grow wheat in a multitude of different climates. The crop stays fresh for a long time and has a high nutritional value. These facts ensure that wheat will remain an important food staple and a valuable commodity for the foreseeable future.

Where Is Wheat Grown?

Wheat grows all over the world on every continent except Antarctica. The crop has several varieties, and climate and soil conditions determine the types grown in specific locations. In the United States, for example, wheat grows in 42 states.

Hard red winter wheat grows in the Midwestern states of Kansas, Nebraska, Oklahoma, and parts of Texas, while soft red winter wheat grows in the Great Lakes region and near the Atlantic coast.

Hard red spring wheat grows in the Northern Plains states of Wyoming, Montana, North Dakota, South Dakota, and Idaho.

map showing the top 10 wheat producing countries

Top Wheat Producing Countries

Global wheat production has increased steadily in recent years as emerging economies demand more food to feed their growing populations. The largest producers of wheat historically include the following countries:

RankCountryFlagAnnual Production (tons)
#1China126 million
#2IndiaFlag of India95 million
#3Russia60 million
#4USA55 million
#5France39 million
#6CanadaFlag of Canada29 million
#7Germany28 million
#8PakistanFlag of pakistan26 million
#9AustraliaFlag of Australia25 million
#10UkraineFlag of Ukraine24 million

Russia is the largest exporter of wheat followed by the European Union, United States and Canada. North Africa, Southeast Asia, Sub-Saharan Africa and the Middle East are the largest importers of wheat.

Wheat, bread, cookies, flour
Wheat products by FotoshopTofs from Pixabay

What Is Wheat Used For? 

Wheat is a member of the grass family and contains several essential vitamins and minerals including B vitamins, calcium, iron and protein. As a result, food products represent the major demand component for wheat.

Wheat used for foodstuffs gets classified by its end use into five groups:

  1. High protein, premium bread making
  2. Premium bread making
  3. General purpose bread making
  4. Biscuit and cake making
  5. Animal feed

In addition to foodstuffs, wheat is used in other industries:

  • The pharmaceutical industry uses gluten in wheat to manufacture capsules.
  • The paper industry uses gluten to coat paper products.
  • The health and beauty industry use wheat germ, a part of the wheat plant rich in vitamin E, in soaps and creams. Wheat germ is also a healthy food source.

Wheat plays a small role in bioethanol production, although its use is limited compared to other crops such as corn. Wheat is also used to feed livestock.

What Drives the Price of Wheat?

The price of wheat is usually highly correlated with the price of other grains such as corn and barley. Most of the economic and trade factors that move wheat prices affect agricultural commodities in general.

The biggest drivers of wheat prices are:

  1. The US dollar
  2. Supply and demand imbalances
  3. Emerging markets
  4. Weather
  5. Ethanol subsidies

The US Dollar

The US currency is the world’s reserve currency. As a result, wheat, like other commodities, gets quoted in US dollars. Sellers of wheat receive fewer dollars for their product when the US currency is strong and more dollars when the currency is weak.

Therefore, a strong US dollar depresses wheat prices, while a weak US dollar lifts them.

In addition, since the United States is a major exporter of wheat, its price will likely continue to be quoted in US dollars.

Supply and Demand Imbalances

Governments often take actions that result in supply and demand imbalances in the wheat market. For example, in recent years, India has enacted import duties on wheat in an attempt to support domestic production. These taxes could lead to depressed demand for exports and lower global prices.

On the other hand, countries that subsidize wheat with tax or other incentives may cease to do so in the future. Farmers would then switch to growing other crops, which could cause wheat supplies to diminish and prices to rise.

Emerging Markets

Global demographic patterns are shifting. Population growth in the developed world is stagnant or declining, but Africa, Southeast Asia and the Middle East are experiencing a population boom. As the population in these areas increase, their demand for food will also grow.

Wheat is a nutritious food source that grows in a variety of different climates, so it will likely become a staple item in emerging markets. Also, as these countries grow wealthier, their consumption of meat will likely increase. Since wheat is an important source of livestock feed, this should also boost prices for the grain.

Of course, if major economic or political setbacks occur in these regions, wheat prices would probably suffer.

Weather

Weather conditions play a role in determining wheat prices. If crop yields suffer as a result of either too much rain or drought-like conditions, then prices for wheat could spike higher. On the other hand, ideal weather conditions could boost crop outputs and depress wheat prices.

However, the wheat supply is global, so poor growth conditions in one region of the world are often offset by favorable conditions in another area.

Drought conditions
Drought conditions by Jose Antonio Alba from Pixabay

Ethanol Subsidies

The United States government subsidizes corn farmers to help boost ethanol production.  As a result, US farmers have increased corn acreage in recent years at the expense of wheat. This has resulted in a smaller output of wheat and has probably helped boost wheat prices.

The corn subsidies are politically controversial, and should they end, wheat production will probably increase and prices may head lower.

Where Can I Trade Wheat?

Start your research with reviews of these regulated brokers available in .

Loading table...

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 53.00%-89.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Further Reading

Get The Commodity.com Newsletter

Get daily updates on commodity markets.

Thanks for subscribing! We'll be in touch

Oops! Something went wrong...

Commodity.com Daily Newsletter
Get the latest market intelligence from the world of commodities.

Plus500 is not available in the US

Legitimate CFD brokers, like Plus500, cannot accept US clients by law

US traders welcome at these brokers:

Cryoptocurrencies:

  • Trade 14+ major crypto coins
  • Includes Bitcoin, Ethereum & Ripple
  • Super simple setup

Accepts traders in the USA

Start Trading at eToro

Forex, Gold & Silver:

  • Trade gold and silver
  • Trade over 90+ currencies
  • Major US broker

Accepts traders in the USA

Start Trading at Forex

No thanks