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Agricultural Commodities
Trading agricultural commodities is the province of agricultural producers and the likes of multinational grain companies. It is also the province of traders speculating on movements in the agricultural commodities markets. Both groups trading commodities rely upon fundamental analysis of the commodity in question and engage in technical analysis using technical analysis tools such as Candlestick chart formations in order to judge when to stay with a market trend and when to expect a market reversal. The world needs food but growing conditions, food transport and storage, and diversion of food stuffs into energy all affect availability and, therefore, commodity price. This mixture of facts and conditions drives pricing in the futures markets in agricultural commodities. Whether you are interested in trading corn futures or live cattle Commodities and Futures Training will be a good place to start.
The Traders
When you start commodity trading you will be up against the likes of traders working for companies like Cargill and Archer Daniels Midland. These multinational food companies know the fundamentals of the agricultural commodities markets as it is their business. They will, in fact, know fundamentals before you do. Although their advantage may only be minutes or even seconds they will cause market movement to which you will have to react. They are typically the drivers of the commodities markets in wheat, corn, soybeans and other products. You will be in the pack with other traders doing Candlestick analysis to predict market reaction to the trades made by the big money.
Why They Trade
There are two types of traders in agricultural commodities. There are the producers and the buyers who are hedging commodities and their investment risk. There are traders looking to profit on market movement. Farm cooperatives growing sugar beets and sugar producers who buy sugar beets or cane each buy or sell commodities futures contacts to lock in price at a future date. Because these folks know the market in their commodity they may well also trade for profit but their primary motive is to maintain a stable price for their product. The trader speculates on market movement and market reversal in looking to profit. The producers and buyers want a stable market. The pure trader would like to see lots of market volatility.
Why You Trade and Market Participation
When a farm cooperative has locked in what they consider a fair price for their sugar beets, corn, soy beans, etc. they will probably go back to the work of farming. Thus their strategy will be to make a single or single set of trades. When they are done trading volume in a commodity may go down if the producers and buyers are satisfied. Traders who are not in the business of the commodity may well keep tracking the commodity looking for market movement based upon news about the weather, new buyers, etc.
2. Trading agricultural commodities is
the province of agricultural producers
and the likes of multinational grain
companies. It is also the province of
traders speculating on movements in
the agricultural commodities
markets.
3. Both groups trading commodities rely
upon fundamental analysis of the
commodity in question and engage
in technical analysis using technical
analysis tools such as Candlestick
chart formations in order to judge
when to stay with a market trend and
when to expect a market reversal
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5. The world needs food but growing
conditions, food transport and storage,
and diversion of food stuffs into energy
all affect availability and, therefore,
commodity price. This mixture of facts
and conditions drives pricing in the
futures markets in agricultural
commodities. Whether you are
interested in trading corn futures or live
cattle Commodities and Futures
Training will be a good place to start.
7. When you start commodity trading
you will be up against the likes of
traders working for companies like
Cargill and Archer Daniels Midland.
These multinational food companies
know the fundamentals of the
agricultural commodities markets as
it is their business. They will, in fact,
know fundamentals before you do.
8. Although their advantage may only
be minutes or even seconds they will
cause market movement to which
you will have to react. They are
typically the drivers of the
commodities markets in wheat, corn,
soybeans and other products. You
will be in the pack with other traders
doing Candlestick analysis to predict
market reaction to the trades made
by the big money.
10. There are two types of traders in
agricultural commodities. There are
the producers and the buyers who
are hedging commodities and their
investment risk. There are traders
looking to profit on market
movement.
11. Farm cooperatives growing sugar
beets and sugar producers who buy
sugar beets or cane each buy or sell
commodities futures contacts to lock
in price at a future date. Because
these folks know the market in their
commodity they may well also trade
for profit but their primary motive is to
maintain a stable price for their
product.
12. The trader speculates on market
movement and market reversal in
looking to profit. The producers and
buyers want a stable market. The
pure trader would like to see lots of
market volatility.
14. When a farm cooperative has locked
in what they consider a fair price for
their sugar beets, corn, soy beans,
etc. they will probably go back to the
work of farming. Thus their strategy
will be to make a single or single set
of trades.
15. When they are done trading volume
in a commodity may go down if the
producers and buyers are satisfied.
Traders who are not in the business
of the commodity may well keep
tracking the commodity looking for
market movement based upon news
about the weather, new buyers, etc.
17. Buying calls and buying puts on
agricultural commodities is entirely
possible. Typically the trader buys
and the large company sells. Selling
calls and puts is typically more
profitable over time but can be costly
on a single bad trade.
18. Having deep pockets allows the big
guys to do this while you leverage
smaller holdings for potential large
profit. You really want to get out of
your futures position in agricultural
commodities if you are not a
producer or buyer.
19. They will not come to your house
and leave cows on your lawn but
they will ask you to produce cows to
sell or come and get them unless
you exit your contract before
expiration.
