How To Invest In Agriculture Commodities
Firstly, agriculture commodities are stapled crops and animals produced or raised on farms or plantations.
Commodities provide a source of food for people and animals across the world.
On the other hand, agriculture commodities mean any animal.
Or animal product, the plant produced by the person for sale.
Consumption or propagation or for any other use by the person.
But however, on the other hand, some agriculture commodities have purely industrial application.
- The building and furniture industry use lumber from trees.
- Several sectors in manufacturing industry use lumber from trees.
- Wool from sheep provides fabric for the clothing industry.
Agriculture commodities Trading
As India is predominately the agrarian economy, ranking second in the farm production of the work.
As a result, agriculture is to be considered as the backbone of the Indian economy.
Over 1.3 billion people that is nearly 20% of the global population use to work in farming.
Further, in some regions of the world, such as South Asia
And Sub-Saharan Africa, farming employs more people than any other industry.
With the rapid increase in population, it is expected that agricultural commodities are going to play a very vital role.
As the world population is expected to climb from 705 billion to 11.8 billion by 2100.
Agriculture commodities are divided into six category :-
- Cereal grains.
- Oilseeds.
- Dairy.
- Meat.
- Other soft commodities.
- Miscellaneous agriculture commodities.
Cereal grains –
Farmers grow these commodities for various purpose:-
- Food source for humans.
- Food source for animals.
- As a feedstock for fuels.
Wheat, corn, barley, oats, rough rice are some of the common grain commodities.
Most grain commodities have a strong price relation with one another.
And farmer will choose one grain over the another
How to invest in agriculture commodities
Oilseeds –
These commodities provide us with multiple purposes:-
Farmers grew them for –
- The high oil content in the seeds.
- Meal remains after extraction of oil is –
- Cotton.
- Palm oil.
- Soybeans.
- Canola.
Meat –
Meat includes:-
- Live animals raised for meat, organs, hide, bones and hooves.
- And, cuts of meat products during the butchering of animals like feeder cattle, live cattle, lean hogs, pork bellies.
Dairy –
Dairy product include:-
- Whey.
- Milk.
- Butter.
- Cheese.
List of Agri Commodities
Other soft commodities –
Soft commodities are those commodities which are mainly farmed rather than mined.
Soft commodities like cocoa, coffee, sugar, frozen concentrated orange juice.
Miscellaneous agriculture commodities –
Some product has a well-developed product market but does not fit into the above categories.
These items include:-
- Lumber.
- Rubber.How to invest in agriculture commodities.
- Wool.
Some agricultural commodities serve both as food as well as raw material or industrial ingredients.
Both humans and animals consume corn, but the commodity is also an important ingredient in fuel production.
Similarly, humans eat the beef of cows, while a variety of industries use beef hide, fats, and bones to create products.
Everyone in this universe depends on agriculture on one another, whether its directly or its indirectly.
For example:-
- We eat the grains, fruits, vegetables and livestock that farmers produce.
- Build the frames of our houses from lumber.
- Make clothes from cotton and wool.
- Ride in cars with tires made from rubber.
The trade in agriculture commodities is the oldest financial market in the world.
The average return from the last 63 years has been significantly higher the global inflation rate.
There are always new opportunities for traders investing in agriculture commodities.
Reasons To Invest In Agri Commodities
Now, the question arises why should we invest in agriculture commodities?
The four most important reasons are –
- Broad market coverage.
- Liquidity.
- Total transparency.
- Leveraged trading.
Four most important factors.
As the market coverage is so broad, the investor has a lot of opportunities.
And a lot of areas and categories to invest in.
Thus according to people needs and requirement.
They can invest in a certain number of commodities as per their will.
It is so transparent that traders, brokers, or financial advisory.
Can see all the activities clearly and can conclude as per the situations.
It provides transparency as trading platform shows actual market prices.
Agriculture commodities trading provide high liquidity, it is so easy to sell or buy.
As traders can do as per their requirement.
Mainly traders who have sound knowledge of commodities training should invest in it, as it also carries the burden of loss.
For example:-
As it is transparent advisors give their conclusion like –
“The start of 2018 has proven a few things: How to invest in agriculture commodities
Farther, That investment trends for various asset classes may not appear to be the same as last year.
Equity markets, both in India and globally, have turned volatile.
Particularly after hawkish comments pertaining to inflation by US Federal Reserve Chairman Jerome Powell.
Rising inflationary pressures could mean more action–in terms of hiking interest rates–from the US Federal Reserve this year.”
Agricultural Traders
Secondly, The next question arises how these products are traded?
As in the world, agriculture products are traded in minor exchanges.
Around the world, the largest by far is the Chicago mercantile exchange.
These are where the largest agriculture commodities futures are featured.
In spot market also commodities are bought and sold.
A spot trade is the sale or purchase of the commodity for instant delivery.
These are just opposite to future contracts.
As in that transaction are placed on a specific period or on a particular date.
There are many reasons why one would use futures and options in the commodities markets.
Similarly, a large buyer of corn, such as a company that produces breakfast cereal.
May buy corn at a specific price for delivery in the future in order to lock-in the price.
This is referred to as hedging.
Other market participants will use options as a way to protect themselves in the same way that a futures contract would.
Farther, there is also speculators in the market, and where the average retail trader comes into play.
For that reason, you can sell or buy commodities in the spot market as well as the future market.
Investing in Agri Stocks
Firstly, where the investor should invest in the biggest question.
If he really wants to invest in agriculture commodities.
The investor should not only know about how to invest but it is also important to know where to invest.
As this the major sector where investor goes into obstacle and face trouble.
As a result, we must have complete information about the past records.
And past year ups and downs about every particular commodity.
agriculture commodities are very interesting to trade, there is always a new hope for new actions, for next year ahead.
There is always weather obstacles which affect the production and prices of the commodities.
Then also, traders always need to reevaluate their plans if wants to invest in next year.
For that reason, the trader must go through last year performance.
Above all when you want to make money, you need to be careful in which assets you select.
Like, for example, agriculture and play short-term trends.
Because of that, you get benefited from price swings, instead of buying and keeping a broad basket of commodities.
There is always a light on the horizon for opportunities in the agriculture market.
Agriculture Commodities Trading Companies
Top companies trading in agriculture commodities are –
- Rallies India Limited.
- Nuziveedu Seeds Limited.
- Lemken India Agro Equipments Privated Limited.
- Advanta Limited.
- Monsanto India.
- Poabs Organic Estates.
- Rasi seeds.
- National agro Industry.
- Godrej Agrovent Limited.
Rallies India limited is the subsidiary of the Tata Group and is one of the foremost agrochemical companies.
Nuziveedu Seeds Limited deals in agro seeds.
Lemken India was founded in 2010 and its headquarters in Nagpur, Maharashtra.
Advanta Limited is active in the seeds business. It is a plant genetics company.
It’s corporate office and headquarters are in Hyderabad, Telangana.
Monsanto India’s prime business includes the production of pesticides and seeds.
Farther, National Agro Industry was established in 1970 and is based in Ludhiana, Punjab.
Rasi seed produces seeds for pearl millet, maize, and cotton.
Godrej group came into existence in 1990.
The company deals in agro-based products and is one of the top agricultural entities in India.
Than Also, Bird feeds, animal feeds, agrochemicals, poultry-based products.
Lastly, palm oil plantation, these are the activities which it is famous for.
In conclusion, if you have proper knowledge about the market, you can make an eminence profit.
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