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The price of wheat simulation is the follow up to the Blé de France GM simulation.
At the start of the simulation, you own an account worth €100,000 in cash and 1,000 Blé de France shares.
As a SimTrader, your goal in this simulation is to maximize your trading gains.
In this simulation, you can send all types of orders to the market: market orders (MKT), limit orders (LMT), best limit orders (BL), stop orders (STP) and stop limit orders (STL).
The duration of the simulation is initially set to 10 minutes, which corresponds to a 24-hour trading day. Using the timeline, you can increase or decrease the simulation speed at any time.
Your grade for this simulation (100 points) takes into account the following elements:
If you launch the simulation several times, the simulation grade retained is the best grade you obtained on all the simulations (grade which takes into account your trading performance, your trading activity and your MCQ test for each simulation).
Blé de France is a French wheat producer. The firm was created in 1780 by the Turgot de la Beauce brothers, nephews of the famous financial controller of the King of France Louis XVI. The firm is still managed by a descendant of the founders, Charles-Louis Turgot de la Beauce, who is an emblem of the cereal industry in France.
Blé de France fields are mainly located in the Beauce area in the center of France.
The sales structure is composed of two parts:
The ticker symbol for Blé de France shares traded on the market is BDF.
Blé de France was introduced in the French stock market in the 1970s. During the past few years, its stock price soared. This strong price increase can be partly explained by the strong increase in the wheat prices at the world level.
Over the recent period, following the announcement of financial results better than expected: earnings per share of €12), the stock price of BDF stocks has jumped to €120. It then fluctuated around that level depending on the news flow about the company and the price of wheat, which is an important factor.
Traders will closely watch the price of wheat, which has a significant impact on the stock price of the BDF shares. Blé de France has signed multi-year contracts with major agri-food companies (commitment to deliver a certain quantity of wheat at a price already negotiated and constant in the medium term), but it also sells a significant part of its harvest on the international wheat market at market prices which vary over time.
A dozen financial analysts follow the BDF share and participate in the market consensus. The target price is €120 (average of analysts' forecasts).
According to market rumors, the company Blé de France could be of some interest for large agri-food groups that would like to take more position in the sector. The rumors are going well, and we should see more clearly what's going on in the short term.
How is the price of wheat going to fluctuate? Up or down? How will the market react to the news? And especially how will you react? Those are the questions...
The World Cereals (WC) investment fund has developed a model that links the stock price of BDF shares to the price of wheat.
This model takes into account the structure of the company's turnover, that is to say the sales from multi-year contracts at fixed prices and the sale of the rest of the harvest on the international wheat market at market price which varies in the time. The stock price estimate takes into account the current year's profit, which depends on the price of the current wheat, and the profits of the following years, which include a long-term value for the price of wheat.
The table and graph below show the WC estimate results (with an estimated total production of 8 million tons).
|Price of wheat
|BDF stock price
The The price of wheat simulation is interested in the information about the company and its interpretation by the market. What is the relevant information about the company? How is this information interpreted by the market? What is information incorporated in the stock price? This simulation looks at a key concept in financial markets: information.
Teaching goals: the The price of wheat simulation will be the opportunity to understand deeper how information is incorporated by the market.
Learning objectives: this simulation will help you to learn the following elements of finance:
Before or after launching this simulation, you can learn more on information in financial markets by taking related courses to the simulation.
Download the case note to help you during the simulation.
« The key is knowing how to process information. The market is anticipating what will happen, but things never happen as expected. The market reacts to the rumor and adjusts to the news. And you! What do you expect? How will you react? What are you going to do? »
Professor François Longin
« Before starting the simulation, remember that the market is always right; and that the market is always right even when it is wrong... »