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How to Navigate the Grain Futures Market


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Determining Risk in the Grain Futures Market

grain futures market

Trading in the grain futures market can be a great way to make money, as well as to hedge risk. A commodity refers to an investment that is based upon the value of a tangible product such as oil, corn, or gold. These items are typically grown or mined from the earth. Livestock is also considered a commodity. They are subject to risk, not only from political and economic factors, but also from environmental changes that would affect crop growth, feed prices, or mining abilities. Futures of these commodities trade differently than the commodities themselves, but they ultimately reflect the crop’s value.

Grain Commodities

The first grain commodity that many people think of is corn. Due to widespread use of ethanol in fuels, corn value has been surging. Other commodities found in the grain futures market include soybeans, oats, rice, wheat, barley, and rapeseed. These commodity futures can make excellent investments when the right research is performed.

How to Invest in the Grain Futures Market

Investing in any commodity involves risk. Therefore, investors should thoroughly research the grain futures market to determine the best investment to make. You need to look into past performance of the futures, as well as consider any possible factors that may impact the commodity’s value in the future. This could include new government regulations, change in demand for the product, or possible climate changes. When examining past performance, also look at dates to try to determine an outside factor that may have affected values.

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As previously mentioned, corn value has been on the rise in recent years. It is up by over 13% this year, with an increase of 83% in the past 12 months. The value of barley has not risen as dramatically as corn, but has shown steady growth. It is up by more than 37% for the last 12 months, and up by 10% year to date. These 2 grain futures are good examples of commodities that have shown significant and steady growth in the last year or more.

Determining risk in the commodities market is one of the most important steps. You need to examine past performance, as well as future factors to evaluate these crops as potential investments. The grain futures market can be a lucrative investment when due diligence is performed.

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