Everybody knows that the commodity market is one volatile market that has an immense impact on the country’s economy and citizens. Commodities that trade in commodity market effect by several factors like demand and supply, production, weather, and government & economic policies, etc. Like most commodities, the prices of agri-commodities are also determined by the demand and supply and other factors as well. Traders who are trading in agri-commodities should be aware of the factors that affect the agri-commodity futures prices. Here, in this article, we will discuss the factors affecting the agri-commodity prices. 5 Key Factors Affecting the Prices of Agri-Commodities The factors affecting agri-commodity prices are given below: Demand & Supply: It is one of the crucial factors affecting the prices of not only agri-commodities but also other commodities like base metals, bullions, and industrial metals. The supply flow has a great impact on the agri-commodity prices. So, any high demand or shortage in supply of agri-commodities may move the prices of agri-commodities in the commodity market. FMCG Demand: In the last two or three decades, it has seen that the standard of living is rising in countries like India & China. And with it, there is a perceptible increase in the demand for packaged foods and processed foods. Most of the ingredients of packaged and processed foods are agri products. With the demand from fast moving consumer goods (FMCG) companies, the agri-commodities also surge in price, and vice-versa. Weather Conditions: The flow of weather data and weather forecasting also impact on the agri-commodity prices. You also know that India is the predominantly agrarian economy, ranking second in the farm production of the world. Also, the agricultural sector contributes to employment by around 52 percent of the workforce. Also, most people depend upon agriculture. The arrival of monsoon, rainfall, moisture, and dryness in the air plays a major role in the fluctuation in agri-commodity prices. Imports & Exports: It has been noticed that the global commodities prices are also influenced by the imports and exports as well, which are largely driven by government policies. For instance, if there is a delay in shipment then it can have a big impact to the agri-commodity prices. Government Policies: Any shift in government policy can affect the prices of agri-commodities. Whether the government policy is related to imports & exports, or the price of a certain agri-commodity. Even when the government changes the duty structure. There are a lot of factors that tend to swing the agri-commodity prices. Nevertheless, if you have any query or would like to add something then doesn’t forget to mention in the comment section below.
