Overview of At The Money: Hungry? Should You Invest in Wheat?
Bloomberg’s At The Money examines whether wheat is a worthwhile portfolio allocation and how investors can gain exposure without trading futures directly. Host Barry Ritholtz speaks with Sal Gilberte, founder and CIO of Teucrium Trading, about the wheat ETF WEAT, how wheat pricing works, why futures are different from stocks, and what drives major moves in agricultural commodities. The big takeaway: wheat is a highly global, highly essential commodity, but it’s usually best viewed as a small, strategic allocation rather than a buy-and-hold core holding.
Main Themes and Takeaways
Why wheat matters as an investment
- Wheat is a foundational global food staple used in bread, pasta, tortillas, and more.
- Because it is so essential, wheat prices can react sharply to:
- droughts
- crop disease
- war and geopolitical disruption
- export restrictions and shipping chokepoints
- The largest moves often happen when supply is unexpectedly tight, especially in major exporting regions.
Why an ETF like WEAT exists
- Direct futures trading is difficult for most investors:
- requires a margin account
- involves leverage and higher volatility
- needs commodity-specific expertise
- WEAT was designed to let investors access wheat exposure through a normal brokerage account, like a stock ETF.
- The fund is intended to track wheat futures prices, minus fees and other tracking effects.
Futures vs. the cash price of wheat
- The discussion distinguishes between:
- physical/cash wheat prices
- futures prices, which serve as the market benchmark
- Investors generally can’t buy a truckload of wheat, so futures are the practical proxy.
- Futures prices reflect global supply-demand expectations and delivery economics, not just local farm prices.
Which wheat prices matter most
- Not all wheat is the same:
- Soft red winter wheat is the main benchmark and is commonly used for baking.
- Hard wheats are more associated with specialty uses like pasta.
- For most investors, the benchmark wheat market is the one tied to soft red winter wheat futures on the CME.
Market Drivers Explored
Weather is the biggest driver
- The guest emphasizes that for wheat, the most important factors are:
- weather
- geopolitics
- Key producing/exporting regions mentioned:
- U.S. Plains and Dakotas
- Canada
- Ukraine and Russia
- Australia
- Argentina
- parts of Europe
- India and China
- Even though India grows a lot of wheat, it exports relatively little, so exportable supply is what matters most to global prices.
Geopolitics and the Black Sea
- Russia and Ukraine are major wheat exporters, making the Black Sea region a major choke point.
- The Ukraine war caused wheat prices to spike due to fears over disrupted exports.
- The conversation notes that food sanctions are uncommon, but war and shipping risk can still create major premiums.
Supply is often tighter than it looks
- Gilberte notes that the world often has only about six months of excess wheat supply.
- A bad harvest can quickly reduce that cushion and create outsized price moves.
- That’s why wheat prices can look flat for long periods and then spike rapidly.
How WEAT Is Structured
Why the fund holds multiple futures maturities
- WEAT holds three different wheat futures contracts across different maturities, roughly evenly weighted.
- This helps reduce volatility versus holding only the front-month contract.
- Benefits of the multi-contract structure:
- less sensitivity to short-term price distortions
- better participation in broader price moves
- improved scalability for the fund
Managing contango and backwardation
- The interview explains two important futures concepts:
- Contango: later-dated contracts cost more because of storage and financing costs.
- Backwardation: nearby contracts are more expensive than later ones, often during supply stress.
- The multi-maturity structure helps mitigate these effects.
- Gilberte frames contango as a normal “cost of carry” in commodities and backwardation as a sign of disruption.
Investment Guidance and Risk
Wheat is best treated as a tactical/strategic allocation
- The guest suggests wheat may make sense when prices are low and supply conditions are favorable.
- It is not framed as a forever holding like a broad equity index.
- The recommended mindset is closer to:
- buy when prices are depressed
- hold through cyclical supply shocks
- rebalance when the position spikes
Suggested risk profile
- Suitable for investors who:
- understand commodity volatility
- can tolerate sharp drawdowns and sudden spikes
- want inflation or geopolitical diversification
- Less suitable for investors seeking low-volatility, long-term compounding.
A rule-of-thumb framework
- Gilberte mentions a rough historical pattern:
- droughts appear every four to seven years
- low wheat prices can offer asymmetric upside potential
- He also notes a rough relationship between wheat and corn pricing:
- when wheat gets near roughly $5/bushel and corn is around $4/bushel, historical downside may be limited relative to upside
Practical Trading Advice Mentioned
ETF trading tips
- Use limit orders, not market orders.
- Avoid trading right at the market open.
- Let prices settle before entering ETF orders, especially when underlying futures may be moving quickly.
Bottom Line
The episode argues that wheat can be an effective way to express a view on food inflation, weather shocks, and geopolitical risk, but only as a small, disciplined allocation. The key value of a product like WEAT is access: it lets ordinary investors participate in a commodity market that is otherwise hard to trade directly. The main lesson is that wheat is cyclical, globally important, and often sleepy until disruption hits—then it can move fast.
Notable Quote / Mnemonic
- “Weight, weight, drought out” — a tongue-in-cheek reminder to build a small allocation when prices are cheap and exit when weather-driven shortages push prices higher.