Rice is an important agricultural and food crop.
It is predominantly grown by small farmers on plots of land less than one hectare. Rice is also used as a “wage” commodity by workers in the cash crop and non-agricultural industries.
Rice as a commodity
How is Rice Traded and Financed?
Rice trading can be financed in a variety of ways, with receivables finance and secured financing being the most common.
Unpaid invoices, for example, are representations of receivables. They’re considered reserves, and traders can use them to obtain funding.
– Rice contracts for Discrepancies (CFDs)
– Rice Shares
– Exchange-traded funds (ETFs)
– Rice Options
Investing in Rice
Rice may be bought from an exchange-traded fund by a retail investor. There are no ETFs that are 100 percent invested in rough rice, but there are a few that have a portion of their portfolio invested in rough rice. Elements International Commodity Index- Agriculture Total Return is one possible ETF for the investor to consider (RJA).
Importance of rice as a commodity
The average rice consumption worldwide was 58 kg in 1999 and in some countries of Asia, the highest intake was 211 kg/person in Myanmar. Rice eaters and farmers make up the majority of the world’s poor: the UNDP Human Development Report for 1997 estimates that roughly 70% of the worlds 1.3 billion poor live in Asia, whose staple food. is rice.
To some extent, this is due to Asia’s large population, but malnutrition continues to affect a much greater proportion of the population in South Asia than it does in Africa. Rice is the most important commodity in their daily lives for these people. The average individual in Vietnam, Bangladesh, and Myanmar consumes 150-200 kg per year, providing two-thirds or more of total caloric intake and about 60% of daily protein consumption. Rice also accounts for approximately half of calories and one-third or more of protein in relatively wealthy countries like Thailand and Indonesia.
Factors influencing rice prices
- China and India Demand
- Trade Policies
- Crude Oil Prices
China India Demand
Rice consumption can decline as a result of its traditional status as a low-cost food. For hints about future rates, traders should keep a close eye on consumption trends in these two countries.
The world’s largest consumer’s increased stockpiling should be a warning sign for costs. When inventories rise, the probability of a supply shortage decreases while the likelihood of a consumer supply overhang grows.
Weather affects the rice supply and prices, as they are for all agricultural commodities. Rice production, in particular, is extremely dependent on the availability of sufficient water. Drought conditions in major rice-producing areas can result in supply shortages and higher prices. Rice traders should keep a close eye on precipitation and temperature levels in key growing areas.
Crude Oil Prices
Rice futures trading can benefit all parties involved. By entering the national market and de-risking themselves from price fluctuations, farmers and consumers can expect better and more predictable prices. The Indian government, which often bears the brunt of market failures, could save money on foodgrain procurement, storage, and handling.
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