Empirical literature is generally disputed about the impact of agricultural commodity derivative trading on spot markets. The purpose of this study was to empirically investigate role of derivative trading in price discovery of wheat across spot and future market. It investigates price discovery of assets in long run between future and spot market. The Johansen cointegration test (1990) determines the existence of long run equilibrium between future and spot market. The results show that the long run equilibrium relationship exists in Wheat. The results revealed that future markets played a dominant role in giving price signals to spot market. To deepen the markets the government needs to encourage participation of hedgers in the future market by promoting better infrastructure facilities like low storage costs, warehouse receipts and electronic spot exchange.

___________________________________________________________________________________

Keywords: Empirical Literature, Agricultural Commodity, Spot Market, Electronic Spot Exchange.