India is primarily an agricultural economy, ranking second in the world in terms of farm production. Agriculture’s contribution to the nation’s gross domestic product (GDP) decreased to less than 15 per cent in 2012–13, and the agricultural sector employed approximately 52 per cent of the labour force.
According to the USDA, India exported agricultural products worth $39 billion in 2013, making it the seventh-largest agricultural exporter globally and the sixth-largest net exporter. According to the World Bank, agriculture contributes approximately 14.7 per cent of total export profits. Along with the agricultural raw material, commodities made from this raw material account for around 20% of Indian exports. In other words, agriculture and agricultural-related products account for around 38 per cent of the country’s overall exports.
While keeping up with population growth, agricultural production has increased dramatically over the past several decades, posing significant issues in marketing and supply, storage, and distribution, among other areas of concern. In the middle of all of this, the development of existing institutions in spot and derivative trade has become increasingly important, as commodity markets impact the lives of millions of stakeholders in the country’s complex and expansive commodities ecosystem. Because of the highly fragmented markets and variable commodity prices, it is difficult to ensure that the Indian farmer receives a “fair” and “remunerative” price for their produce. In light of these considerations, the administration implemented several measures.
Following the achievement of your short-term financial objectives, you may wish to broaden the scope of your investment portfolio. It is possible that agricultural commodities trading will suit your long-term financial objectives if you are searching for significant returns on your investment. A commodity is a necessary product. Futures contracts are used in the trading of agricultural commodities. The term “soft commodities” refers to agricultural commodities, whereas “hard commodities” refers to products derived from mining. Contracts like these can be used for hedging against risk or as an opportunity to make money through speculating.
What is the best way to sell agricultural commodities?
Since 2002, the current form of commodity trading has been permitted in India. You could trade in the agricultural commodity market by purchasing and selling futures contracts on any of the six exchanges that enable Agri commodity trading located throughout the world. Two of the six commodity exchanges that allow commodity trading on their platforms are devoted solely to the trade of agricultural commodities. The National Commodity & Derivatives Exchange Limited and the National Multi-Commodity Exchange are the two exchanges in question. Before 2017, trading in agricultural commodities was a challenging endeavour. Late that year, the Securities and Exchange Board of India (SEBI) authorised commodity trading using standard Demat accounts, which had previously been prohibited.
To invest in the agricultural commodities market, you can research a commodity and predict its price. If you are confident in your forecast of future pricing, you should pay the required margin to your broker and purchase a futures contract. Per the terms of the deal, the sale would be completed at the specified future date. Even while brokers provide significant leverage in commodity trading, you should be aware of the hazards associated with this type of trading. With a few bad wagers, your life savings might be wiped out instantly.
The agricultural commodity market
Agro-commodities account for around 12 per cent of the total global commodity trade. Every agricultural product does not have its own Agri commodity market, and vice versa. Only significant commodities are traded on six commodity exchanges in India, and Agri commodities are traded on one of those markets. Spices, grains, pulses, oilseeds, rubber, fibres such as cotton and jute, dried fruits, and other items are the most commonly traded commodities. These items are typically grown to make money.
Advantages of agricultural commodities trading
In addition to providing a feasible diversification alternative, agriculture commodity trading may also provide you with excellent hedging options against hazards. The differential in price between the spot and futures markets may potentially present an opportunity for profiting. Trading in agricultural commodities also serves as an efficient price discovery process, providing buyers and sellers an indication of what to expect in terms of future prices. Suppose you have a firm grasp of supply and demand in the agricultural commodity markets. In that case, you have the potential to earn significant returns on your investment, mainly because margins on agricultural commodity trading are higher than they are on other markets.
Concluding Remarks
Investing in agricultural commodities has the same level of risk as trading in stocks. Before you place your bets in the market, you should be informed of the hazards. Most information regarding the agricultural commodity trade can be found on the internet, which is positive. Some well-known ways to limit risks include stopping losses and using options trading strategies.
Agricultural-based items are exchanged across commodity markets in 29 different categories. Following are the most popular products:
- Condiments and sauces
- Cotton and fibre
- Beer ingredients
- Fresh fruits, like apples and grapes
- Pulses, like lentils and beans
- Snacks, like sugar confectionery, chewing gum, chocolates and biscuits
- Cereals
- Nuts like almonds
- Different types of spices
This article should give you a good idea about how to trade in agri commodities, agri commodities, agri trading and agri commodity prices.
