Definition
Agri Commodity Futures
Agri commodity futures are contracts on farm products like soybean, cotton, guar and spices, traded mainly on NCDEX to help manage price risk and discover fair prices.
Traded chiefly on the NCDEX, agri futures cover oilseeds, pulses, spices and fibres, giving farmers, traders and processors a tool to hedge against seasonal price swings driven by monsoon, sowing and demand.
Indian agri markets are politically sensitive, so SEBI and the government periodically suspend futures in key food items to curb perceived speculation during price spikes. When permitted, these contracts improve transparency and let the supply chain lock in prices ahead of harvest.
Related terms
- NCDEX (National Commodity Exchange)NCDEX is India's leading agricultural commodity derivatives exchange, where futures on farm products like guar, soybean, chana and cotton are traded.
- Spot vs Futures (Commodity)The spot price is for immediate delivery of a commodity, while the futures price is agreed today for delivery later; the gap reflects storage, financing and convenience costs.
- Minimum Support Price (MSP)Minimum Support Price is the floor price at which the Indian government commits to buy certain crops from farmers, shielding them from price crashes.
- Commodity HedgingCommodity hedging uses futures or options to lock in input or output prices, protecting producers and consumers from adverse moves in commodity prices.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.