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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.
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.