CBOT CBOT Wheat HistoryWheat History

We all know about We all know about WHEATWHEAT, but the way , but the way wheat market have grown up is still a wheat market have grown up is still a mystery to some of us. Today, we will mystery to some of us. Today, we will

learn some knowledge aboutlearn some knowledge about

In the 17th century, wheat history in the Americas In the 17th century, wheat history in the Americas began when European emigrants brought wheat began when European emigrants brought wheat

across the ocean to the new land. After that, across the ocean to the new land. After that, everything went well. Once in the U.S, wheat everything went well. Once in the U.S, wheat

production expanded, and grew into one of the production expanded, and grew into one of the largest cash crops grown domestically.  Both largest cash crops grown domestically.  Both

production and consumption were growing fast. production and consumption were growing fast. The means to accurately price the wheat was also The means to accurately price the wheat was also

disappearing.  disappearing. 

The number of buyers and sellers needed a The number of buyers and sellers needed a medium to trade their products meant the growth medium to trade their products meant the growth in market participation.  To be successful, they in market participation.  To be successful, they

needed to understand supply and demand needed to understand supply and demand fundamentals in order to facilitate accurate price fundamentals in order to facilitate accurate price

discovery, but it wasn’t just that. discovery, but it wasn’t just that. 

The lack of a proper medium of exchange was The lack of a proper medium of exchange was also inefficient for crop production. At first, farmers also inefficient for crop production. At first, farmers

were not accurately aware of market demands. were not accurately aware of market demands. They did not know how much of a crop their peers They did not know how much of a crop their peers

were planting, and this lead to a number of were planting, and this lead to a number of shortages and supply gluts. shortages and supply gluts. 

In the end, wheat history and the evolution of the In the end, wheat history and the evolution of the wheat futures market are results of these market wheat futures market are results of these market

inefficiencies.inefficiencies.

The Chicago Board of Trade (The Chicago Board of Trade (CBOTCBOT) was founded ) was founded in 1848. Talking about wheat history, it should not in 1848. Talking about wheat history, it should not

be skipped learning about CBOT.be skipped learning about CBOT.

All wheat traders know about it as the world's All wheat traders know about it as the world's oldest futures and options exchange. Chicago has oldest futures and options exchange. Chicago has

been known as the natural location for an been known as the natural location for an exchange of agricultural goods.exchange of agricultural goods.

The Windy City is located in the center of the U.S. The Windy City is located in the center of the U.S. The Midwest grain producing regions allowing for The Midwest grain producing regions allowing for market participants to get their product to market. market participants to get their product to market. 

To be the home for the first U.S. futures market To be the home for the first U.S. futures market exchange, Chicago also has another contributing exchange, Chicago also has another contributing

factor: Chicago’s location is on Lake factor: Chicago’s location is on Lake Michigan. This allowed for efficient transportation Michigan. This allowed for efficient transportation

of of commoditiescommodities via the Great Lakes. via the Great Lakes.

Back to the history, the corn contract was the first Back to the history, the corn contract was the first futures contract which was offered by the CBOT futures contract which was offered by the CBOT with several other grain futures contracts being with several other grain futures contracts being

formalized in 1865.formalized in 1865.

In1870, the first iconic octagon shaped open In1870, the first iconic octagon shaped open outcry pits were introduced.  Though the regulation outcry pits were introduced.  Though the regulation

of futures markets innovated and adapted to of futures markets innovated and adapted to growing market needs, it would still be several growing market needs, it would still be several years until the exchanges developed into their years until the exchanges developed into their

current forms. current forms.

Thanks to time, until 995, the first electronic Thanks to time, until 995, the first electronic platform, Project A, was implemented. Then, platform, Project A, was implemented. Then,

Project A was used to trade grain futures during Project A was used to trade grain futures during hours that open outcry was not operating. hours that open outcry was not operating. 

And in 1998, electronic and open outcry became And in 1998, electronic and open outcry became side by side platforms. From that time, you can side by side platforms. From that time, you can see on the television with pit traders using their see on the television with pit traders using their laptops hanging around their neck to trade the laptops hanging around their neck to trade the

electronic and open outcry markets electronic and open outcry markets simultaneously. simultaneously.

The growth of the wheat futures market on the The growth of the wheat futures market on the CBOT – now the Chicago Mercantile Exchange (CBOT – now the Chicago Mercantile Exchange (

CMECME) Group – and wheat history laid the ) Group – and wheat history laid the foundation for other exchanges that trade wheat. foundation for other exchanges that trade wheat. 

* The Minneapolis Grain Exchange (MGEX).* The Minneapolis Grain Exchange (MGEX).

* The Kansas City Board of Trade (KCBOT) house * The Kansas City Board of Trade (KCBOT) house and trade their flagship contracts: the hard red and trade their flagship contracts: the hard red

spring wheat and the hard red winter wheat spring wheat and the hard red winter wheat respectively. respectively. 

Until now, the MGEX, KCBOT, and CBOT are the Until now, the MGEX, KCBOT, and CBOT are the result of growth and innovation in the wheat result of growth and innovation in the wheat

futures markets.futures markets.