How to trade agricultural commodity in India?
Planned agriculture commodity trading in India started way back in 1875 with the establishment of Bombay Cotton Trade Association and after being suspended in 1960’s due to wars and famines. Agriculture commodity trading was again started in 2002.
Commodity trading in India is made viable by three nationwide multi-commodity exchanges namely Multi Commodities Exchange, National Commodities and Derivative Exchange and National Multi Commodity Exchange.
Agro commodities trading
There is no limitation for trading in agricultural commodities and someone satisfying necessary fundamentals can trade on the exchange.
Agro commodity trading offers a good opportunity to the retail as well as corporate investors looking for investments away from the conventional stock and shares and diversifies their portfolios.
To trade on the exchange, an investor needs to open a trading account which entails investor details such as a Bank account, Demat Account with NSDL, PAN No., agreements with the brokers and KYC to be furnished.
The regulatory authority to control and protect the interests of investors investing in the commodities market in India is the Forward Markets Commission which is equivalent of SEBI which protects the interests of investors in share and securities. The prices and lot size vary based on the exchange they are being traded on and the lot sizes can be quoted in Kg’s, quintals or tons and the trade settlements can be made either in physical form by taking delivery or by remitting cash.
The Indian MCX
Indian MCX is the biggest exchange in the country in requisites of total turnover and trades majorly in bullion and mineral commodities in adding up to plantations and other agro based commodities.
NCDEX on the other hand chiefly deals in trading agro based commodities. There is a total of 25 agro based products.
Top 10 Agro Commodities Traded in India
1. Condiments and Sauces
2. Cotton &fiber
3. Craft Beer and Beer Ingredients
4. Fresh Fruits (mostly apples and table grapes)
5. Hides and Skins
6. Pulses (peas, lentils, chickpeas and beans)
7. Snack Foods((including cookies, chocolates, chewing gum, sugar confections, etc)
9. Tree nuts (primarily almonds)
Online commodity trading can harvest superior profits for investors who can examine the demand-supply equation well and take conversant decisions, as well as, farmers who can view the future prices of the commodities and decide the most valuable market to sell in.
The Agro trading is determined by the following important factors.
1. Seasonal factors
2. Supply &demand based factors
3. Weather forecast factors – Monsoon / Rainfall – good growth