The Agriculture Commodity Market
The agriculture commodity market is one of the oldest. It is a significant financial market in the world dating back to the 19th century. The market deals with commodities which are of utmost importance for human existence. The continuous thickening of the commodity market in the world has regularly accounted significantly for a country’s economic prosperity.
What is an Agricultural Commodity?
Agricultural commodities are an essential part of life. These commodities consist of two broad categories. Firstly soft commodities, including a variety of agricultural goods, such as corn, soybean, wheat and sugar. In contrast, the second category, known as hard commodities are excavated and mined. For example, aluminium, gold, silver and crude oil.
What Influences Agricultural Commodities Prices?
A variety of factors affect agricultural commodities prices. Some important factors include seasonal cost cycles, the typical supply and demand, weather patterns, such as floods and droughts, and other natural disasters.
How Trading takes place in Agricultural Products?
Trades occur mostly in two different methods, namely spot trade and future contracts.
The sale or purchase of a commodity for instant delivery is referred to as spot trade. Commodities such as crude oil, are sold on the spot market.
Future agreements, where two gatherings consent to execute an item at a particular cost and date later on. It is one more method of exchanging these agrarian items.
Under various circumstances, a trader may use the future option in the commodities markets. For example, a large purchaser of sugar, such as a company that produces beverages or dessert, may buy sugar at a specific price for delivery in the future to lock-in the price. This is a common practice, generally referred to as hedging.
Why Trade Agricultural Commodities?
- Complete Transparency – The trading program shows a completely transparent and accurate display of prices.
- Leveraged Deals – Majority of traders prefer trading agricultural commodities. Because it allows them to leverage their trades for a portion of the actual worth of the contract.
- Large Market Spotlight – Agricultural commodities remain on display enabling everyone to implement their trading skills and insights to the most relevant asset and market.
- Liquidity – This trade offers high liquidity in its ways. Making it just as easy to sell or buy futures as traders can easily liquidate their positions whenever needed.
- Inflation Protection – Inflation has a different impact on commodities as compared to financial assets like stocks and bonds. This is because inflation causes the currency to depreciate. This decays the true cost of financial assets like bonds and stocks.
Getting your hands dirty in the agricultural commodity market can be extremely beneficial and reliable from a traders perspective. It can land you with fruitful results and financial security. For more help PL Global Impex Pte Ltd. is here to solve your queries.