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Agri futures

Aug 27 2010 11:17
What did the sunflower say to the mielie? “I might only be pretty now, but next week I’ll be worth a lot of money when they harvest me for oil.”

Jokes aside, trading in agricultural commodity derivatives is a thriving alternative investment.

Most often it’s on future prices – agri futures – and is centred on the prices on white and yellow maize, wheat, soya and sunflowers.

Agri futures are offered by Safex Futures Trading and can be accessed online through a number of stockbrokers and asset managers.

But as with so many alternative investments, specialist knowledge or advice is needed.

It’s been the financial ruin of some farmers: the people who should, and most often do, have the best idea of future agricultural commodity prices. Ideally, farmers should use agri futures to hedge their crops, protecting the downside against crop failure or a volatile futures price.

The danger comes in when farmers cross the line and become speculators on the price.

There are lots of professional speculators out there, from large multinational commodity traders to South African millers, and the price of a crop can be moved by factors that have little to do with demand, supply or the weather.

As always, it’s the mielie that gets the last laugh.

The market for white maize is the most liquid and offers the best trading opportunities.

 - Finweek



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