This article is similar to corn's, but talking about wheat. 

Taking data from magrama (LINK 1), we can use the average cash price paid during the last years in our grain markets. On the other hand, I use websites such as this one: HGCA (LINK 2) as a good source for the futures data. Quandl is also a good one, or Yahoo Finance...

Wheat derivatives are exchanged in the CBOT exchange (LINK 3), and also in Euronext exchange (LINK 4). Since they are refered to USA physical delivery wheat or France (we are talking about Milling wheat, not animal feeding wheat), these futures may quote similar but not equal.  A talk appart is needed if we want to distinguise the types of wheat traded... but better to read this, extracted from here (LINK 5):

Wheat types: the harder the wheat, the higher its protein content and its potential to produce gluten. Gluten gives the dough its elasticity and enables yeast to work efficiently.

In USA, wheat is divided into six classes: Hard Red Winter, Hard Red Spring, Soft Red winter, Hard white, Soft white, and Durum. Spring wheat (hard, soft, and durum) is planted in spring and harvested in summer. Winter wheat is planted during fall or winter. 

NYSE Liffe’s Milling Wheat contract represents European soft wheat, most of which is harvested in July. Europe is a key exporter in the international markets. The EU 27 produced around 140 million tons of wheat in 2010, which is more than 20% of the world production. The main European producers are France, Germany and the United Kingdom.  
The last three years saw strong volatility (35%) of the underlying prices of wheat. This was mostly due to the weather conditions of the important players. European Milling Wheat is used mainly in the milling, starch and food industries.

When  actors in the idustry need to protect their own interest, they use derivatives (or other non financial ways) to avoid big increases of prices -THE BUYERS- or the prices to drop down under the break even for the prodcution expenses -THE PRODUCERS, who are THE SELLERS-... 

First of all we will see how are the local data match the futures quotes. The difference between local prices (cash prices) and the futures is calle the "basis".

Basis: cash price - future price

and it has something to do with transport to the delivery grain elevator, local availability, expectatives.. among other elements.

Let's see hoy in the charts look the cash price from our average (spanish) for last 8 years in comparison to futures (Matif milling Wheat).

 The same, drawing CBOT data...

This shows 8 years charts, and despite it is not useful for hedging (nobody hedges his underlaying assets that much in advance), it is easy to see that both lines are not following the same path every time. 

The difference is tha earlier called basis. This chart represents how this difference (this is CASH minus MATIF) moves along these 8 years between +60 and -40; and has very important consequences on the hedges.  

We will see in the next articles:

-What to do depending on which size you are (buyer-seller)
-How to couple the graphs

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