Four different grains are traded on the futures exchanges of the United States (I'm pretty sure that some foreign exchanges offer rice futures): corn,...
Four different grains are traded on the futures exchanges of the United States (I'm pretty sure that some foreign exchanges offer rice futures): corn,
wheat, soybeans and oats.
All four have the same contract size of 5,000 bushels. The penny price of one contract (or the multiplier) is therefore $50. (That's .01 times 5,000.)
However, the grains are traded down to the fourth of a cent. Therefore, each tick is worth $12.50, and is quoted as cents per bushel. However, they are always quoted in eighths, so the denominator of the fraction is always an eight. So the minimum tick is 2/8. You can have 2/8, 4/8 and 6/8s.
Because the denominator is always eight, there's no reason to show it in price quotes. Therefore, if December corn is $4.25 and 2/8, you'd see it displayed as 425'2. The two is the fraction. That is written with an apostrophe in front of it, sometimes by a hyphen.
Of course it helps to trade these if you're familiar with the various kinds and grades of these grains. You should also know where they're grown, when they're planted and when they're harvested. Spring wheat and winter wheat are different, for example.
Weather has a major effect on these commodities. Too much rain during the planting season can delay it, reducing yield. However, too little rain during the growing season will also greatly reduce yield. So will diseases and insects. When the summer is hot and dry in the Midwest, grain prices go up.
Two types of commodity contracts are related. They're soybean oil, which extracted from crushed soybeans and used in food products, and soybean meal which is what's left over after the soil is extracted from the crushed soybeans. That's generally used as animal feed.
Soybean oil futures, or just bean oil, is traded in contracts of 60,000 pounds, and quoted in cents per pound. One tick is one-hundredth of a cent, and is worth $6. One contract cent is therefore worth $600.
The contract size of soybean meal is 100 tons. It's quoted in dollars and cents per ton. The minimum tick is 10 cents. Thus, a contract could be quoted as 235.10 or 235.20 but not 235.15. Each dime quoted is a tick worth $10.
Soybeans, soybean meal and bean oil are obviously related, since all depend on soybeans themselves. Some traders believe they can tell when one of these is mispriced in relation to one or the other or both of the other soybeans futures. They can trade what's called the crush spread.
Another aspect of these commodities is demand. People need food, but sometimes buy more or less on their household economics. And weather overseas can affect demand for U.S. grains. A hot dry summer in India can increase demand for U.S. wheat around the world, raising prices here as well as in India.
Of course, there is always a certain degree of demand, because people do need to eat.
