What are Agriculture Commodities?
Like financial instruments, agricultural commodities are also essential for the commodity markets. These commodities have a higher rate of fluctuation due to seasonality. The primary reason is that the production of commodities is seasonal while their demand is relatively even throughout the year.
As the demand is throughout the year, there is a mismatch between production and consumption, which means that commodities must be stored. Thus, storage (and interest) costs are highly relevant in futures prices.
Example of Agriculture Commodities
One of the significant commodity products is oil and gas. If we take an example of gas, it is produced throughout the year, but its consumption is higher during the -winters when people use it for heating purposes.
Why are Agriculture Commodities important?
Commodity marker now plays a critical role in the financial markets and a large quantum of futures, and the forward market is used for commodity products; hence, it is essential to know about agriculture commodities.