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Things To Keep In Mind While Trading In Agri Commodity Futures

5 Mins 19 Oct 2021 0 COMMENT

Agri commodity trading is one of the major attractions of the commodity market. Those who are keen to meet their long-term financial goals are particularly interested in agri commodity trading.  This kind of trade involves an agreement to buy or sell a specified quantity of agricultural commodities at a pre-fixed price on a future date.  Examples of such commodities include grains, sugar, cocoa, oil etc.

Here is a list of things you need to remember to make the most out of the trade:

  • You can buy or sell agri commodity trading contracts in any of the six exchanges in India.
  • National Commodity & Derivatives Exchange and National Multi-Commodity Exchange are specifically focused on a variety of agri commodities. You can trade using your regular demat account.
  • Volatility is a crucial aspect of this type of commodity trade that directly impacts your profit. A higher volatility means you suffer a greater price risk and deposit a higher amount of margin money in your commodity trading account.
  • Agri commodity trading helps ensure an effective hedge against risks.  Depending on the difference between the spot and futures prices, you can enjoy profits.
  • Commodity trading of this kind is an efficient way to discover the future price. Investors who have a solid grasp of how supply and demand work in the agri commodity market can make substantial returns.
  • Warehousing facilities have a direct impact on the price of various agri commodities as most are soft commodities.
  • Price for soft commodities such as grains are different from prices of hard commodities such as zinc due to shorter shelf life.
  • Prices of agri commodities can become more competitive if proper warehousing facilities are available to the farmers.
  • Surge in the use of alternatives is a key factor that affects the price in commodity trading; if a vast majority of consumers choose soybean oil over groundnut oil due to health reasons, the prices are going to fluctuate to meet the demand patterns.
  • Prices in this form of commodity trading are also affected by external factors such as weather conditions; most of the agricultural commodities in India are kharif crops and, therefore, monsoon is critical for the harvesting season.
  • If sufficient monsoons are not received, and the farmers don’t have access to proper irrigation facilities, the prices of the agri commodities may shoot up.
  • If agri commodity trading is something you wish to try out, you need to be confident about your assessment of future prices.
  • You will need to open a trading account and deposit the margin money to the broker to start trading; make sure not to bet your entire life savings on agri commodity trading.
  • Like every other investment, commodity trading also has its own share of risks; one wrong move can undo all your efforts.  So, make sure that you play your cards smartly.


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