Glossary

Plain-language definitions for terms used across this site, written for farmers, students, traders and anyone else trying to make sense of agricultural markets.

B

Backwardation

A futures market where prices for nearer delivery dates are higher than for later ones - unusual for a storable commodity, and typically a sign of tight near-term supply, since buyers will pay more to get the commodity now rather than wait. The opposite of contango.

Basis

The difference between a local cash price (what you'd actually be paid at your grain elevator or buyer) and the nearby futures price on an exchange. A key concept for anyone selling into a market that references futures prices, since it captures local supply/demand, transport cost and quality differences the futures price itself doesn't reflect.

Benchmark Price

A single reference price meant to represent an entire global or regional market, rather than any one specific transaction, region or quality grade. The World Bank Pink Sheet prices used throughout this site are benchmark prices, not necessarily what any individual farmer or buyer paid.

Bushel

A US customary unit historically defined by volume, but standardized today as a fixed weight per crop (e.g. 27.2155 kg for wheat, 25.4012 kg for corn) rather than a fixed volume, since different grains pack to different densities. Still the standard trading unit on US exchanges like the CBOT.

C

Clearinghouse

The institution that sits between every buyer and seller on a futures exchange, guaranteeing that both sides of every trade are honored even if one party defaults. This is what makes exchange-traded futures more secure - but also more standardized and less flexible - than a private forward contract.

Contango

A futures market where prices for later delivery dates are higher than for nearer ones, reflecting the cost of storing and financing a commodity until then. The normal state for most storable commodities; the opposite of backwardation.

Crush Margin

The difference between what a processor pays for a raw commodity (e.g. soybeans) and what they can sell its processed products for (e.g. soybean oil and soybean meal combined) - the profit margin that determines how much processing capacity actually gets used, and a driver of prices for the raw input and its processed products alike.

E

Export Restriction

A government limit or ban on exporting a commodity, usually to protect domestic supply during a shortage. Can cause sharp price spikes in countries that depended on those exports, even when nothing changed in their own domestic harvest.

F

Forward Contract

A private, off-exchange agreement between two parties to buy or sell a commodity at a set price on a future date - the direct counterpart to a futures contract, but negotiated directly (often through a grain elevator or buyer) rather than traded on an exchange, and not backed by a clearinghouse.

Fungible

Interchangeable - one unit is treated as equivalent to any other unit of the same grade, regardless of exactly where or by whom it was produced. Wheat or crude oil of a given grade is fungible; a specific parcel of farmland is not. Fungibility is what makes standardized futures contracts and blended national or global benchmark prices possible in the first place.

Futures Contract

A standardized agreement to buy or sell a fixed quantity of a commodity at a set price on a future date, traded on an exchange like the CME or Euronext and guaranteed by its clearinghouse. Used both by producers and processors to lock in a price ahead of time (hedging) and by financial traders speculating on price moves.

H

Hedging

Using a futures or forward contract to lock in a price in advance, reducing exposure to price swings between now and when a crop is actually sold or an input is actually bought. The opposite of speculating: the goal is to reduce risk, not to profit from price moves.

M

Marketing Year

A crop's own 12-month accounting period, running from one harvest to just before the next rather than the calendar year - timing differs by crop and country (e.g. US corn: September-August; EU wheat: July-June). Prices, stocks and the WASDE's season-average price are usually reported by marketing year, so a "2026/27" figure spans parts of two calendar years.

Metric Ton

1,000 kilograms - the standard weight unit for most agricultural commodity prices worldwide, apart from US exchanges that still quote grains per bushel.

N

NPK

Shorthand for the three primary plant nutrients supplied by fertilizer: nitrogen (N), phosphorus (P) and potassium (K). A fertilizer's "NPK number" (e.g. 10-10-10) states the percentage of each by weight.

O

Option Premium

The upfront price paid to buy an option (like a put option), similar to an insurance premium - paid regardless of whether the option is ever used, in exchange for the right it grants.

P

Pink Sheet

The World Bank's monthly "Commodity Markets Outlook" report - an informal nickname (from the original paper edition's color) that happens to be shared, unrelated, with a US penny-stock listing service. This site's global benchmark prices come from it.

Producer Price

The price actually received by farmers at the farm gate, before further transport, processing or retail markups. Differs from, and is usually lower than, retail or export prices for the same commodity.

Put Option

The right, but not the obligation, to sell a futures contract at a fixed price (the strike) before a set expiration date, bought for an upfront premium. Used to set a price floor without giving up the chance of a higher price later, unlike a straight futures hedge.

S

Speculation

Trading with the goal of profiting from a price move, rather than to protect against one - the opposite of hedging. Speculators add liquidity to futures markets, making it easier for producers and processors to hedge, even though they have no direct stake in the physical commodity.

Spot Price

The price for immediate delivery, as opposed to a futures price for delivery at a set date in the future.

V

Volatility

How much and how quickly a price moves up and down over a given period. High volatility means large swings are common, which matters for anyone timing a sale or purchase, not just for financial traders.

W

WASDE

Short for World Agricultural Supply and Demand Estimates - the USDA's monthly report projecting production, consumption, stocks and season-average prices for major crops in the US and worldwide, one of the most closely watched releases in agricultural markets. See the Market Reports page for the latest figures.