Primer in Agriculture Commodities

 Primer: Agriculture Commodities

History

    Agricultural products have been traded since agrarian societies. It was regulated by the Chicago board of trade in 1848.

Top Product Groups

Grains and Oilseeds (Corn, Soybeans, Oats, Rice, Wheat)
Livestock (Cattle, Hogs, Poultry)
Dairy (Milk, Butter, Whey)
Lumber
Textiles (Cotton, Wool)
Softs (Cocoa, Coffee, Sugar)

Basic Supply Chain

Farm to Flour Mill or other processors to Consumer.

Pricing

Much of agricultural commodities, like the others, trade on supply and demand. When world events happen and trade embargos are set, production is increased or cut back, or war breaks out in major importers or exporters, supply or demand can experience a shock, adjusting prices to a new equilibrium. Shipping in bulk always reduces costs because of economies of scale.

Futures and other such derivative products are often used by consumers or producers to hedge price risk. Traders may use them to hedge risk while they transport goods.

Transport Costs

Trucks, Railroads, Sea Shipping, and Grain Elevators are popular cost-increasing considerations when dealing with agricultural commodity delivery. Any disruption to the supply chain generally results in a higher transportation cost as the demand for transportation services experiences a shock and shifts.




















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