At The Money: Hungry? Should You Invest in Wheat?

**SPEAKER_1** (0:02)
Bloomberg Audio Studios.

**Barry Ritholtz** (0:04)
Podcasts, radio, news.

**SPEAKER_1** (0:08)
To die before the harvest. The crops, the grains, fields of rippling wheat. Wheat, all there is in life is wheat. Sonya, here's your chance to do something kind for a dying boy.
But I don't really love Boris. I mean, I love him, but I'm not in love with him. Oh, wheat, lots of wheat, fields of wheat, a tremendous amount of wheat.

**Barry Ritholtz** (0:34)
Ever since Russia invaded Ukraine, grain prices have exploded. Gaining exposure to grain like wheat is usually a challenge. Futures are an entirely different animal than stocks or bonds. They have a very different risk profile, not only from stocks, but just against options. There's a whole lot more downside with futures.
The wheat ETF doubled since the war started and have come back down to pre-war levels. Is wheat a fit for your portfolio? I'm Barry Ritholtz and on today's edition of At the Money, we're going to explore the question of buying and selling wheat in your investment accounts. To help us unpack all of this and what it means for your portfolio, let's bring in Sal Gilbertie. He's Founder, CEO and Chief Investment Officer of Teucrium Trading, best known for creating exchange traded funds that give investors direct exposure to agricultural futures. He's also an old school commodity trader since way back in 1982
What was the problem that the wheat fund symbol, WEAT, was designed to solve for investors who wanted exposure to wheat, but are a little skittish about holding futures directly?

**Sal Gilbertie** (1:58)
Well, and thanks for having me, Barry.
So futures of any kind are tough to trade, right? So you've got to have a margin account. They're volatile. It requires a different expertise. And when I heard about ETFs, I didn't even know what an ETF was when I founded this company. I found out and said, wow, that's brilliant, because I was trading commodities and futures. And I said, anybody can buy these things in their stock account. That's amazing. And so we package these things inside of ETFs. And the wheat ETF has been very popular. I don't know if you know Andy Hecht, but he basically says, you know, wheat is more political commodity than oil. It's older. I think it's mentioned 50 or 70 something times in the Bible. Like wheat is wheat. It's a big deal. But also of the crops that I think a higher percentage of wheat is directly consumed by humans than say corn or soybeans, which also goes to animals and fuel and all that. Now you can run wheat through an ethanol plant as an aside if it's lousy and it'll turn into ethanol, but that's not a common thing. So wheat is so integral to human life basically, all right? Bread, tortillas, it's a big deal. You got to have wheat. And so we thought there should be a wheat fund and we started this fund, we structured it, we think properly. So people can buy it in their stock account. They don't need a margin account like any other ETF.
They can buy it. We worry about the futures inside of it, and it's designed to track wheat prices through wheat futures. When they go up, the fund is designed to go up, and when the wheat futures go down, the fund is designed to go down, less some fees and expenses and a little bit of static, but it generally works pretty well.

**Barry Ritholtz** (3:38)
So you mentioned prices. You're not talking about the cash price of physical wheat. You're talking about the seaboat price, the futures price. What's the distinction between the two?
How do investors see this reflected in their grocery prices?

**Sal Gilbertie** (3:58)
Well, so there's kind of a disconnect, not a direct disconnect, but wheat prices are going to move up and down on a bulk level, on a wholesale level. Investors can't buy that. You want to buy a truckload of wheat or a cargo load of wheat somewhere and ship it around, it's impossible. So futures as a proxy, they have delivery points, okay? Each delivery location is going to be a different price, but the advantage of futures and the CME futures are the global standard basically for the soft red wheat.
All you have to do is look at that price, okay? Every farm, every location has a different price for physical wheat, it doesn't matter. It all gets to be a futures equivalent price when you factor in delivery. And so futures is the standard to look at to know where wheat's going.

**Barry Ritholtz** (4:48)
That's what you're looking at. You mentioned soft winter.
When I was doing some research for this conversation, I was kind of shocked at how many distinct wheat markets there are, hard red winter, hard red spring, soft red winter, white wheat, durum. What are all these different wheats?