What is Rice?
Rice is one of the top staple foods of the world, with the largest consumers being China and India. Both of these countries have the lower exports. Total global production of rice is limited to the amount available for international trade. This then leaves small rice-producing countries such as Thailand, Vietnam and the U.S. as some of the larger rice exporters. For these reasons, along with the limited providers of rough rice, futures are becoming an attractive commodity for hedgers and traders.
Uses of Rice
Rice is most commonly used as a staple food around the world. With most Asian countries consuming the largest portions of rice. Many of the most of the more poorest nations have rice as their only source of nutrients due to it’s cost.
Rice can also be used in the brewing of alcohol, rice paper, starch and many other products.
Rice can come in a range of colours including black, purple, red and white each said to contain different levels or nutritional value.
Risks of Rice
Like any futures contract, there is always the possibility that the underlying asset i.e. Rice will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of Rice to rise), if this were to happen and the rice fell in price, your long position in rice will decrease in value.
Cultivation risks associated with growing rice such as low rain falls, insects, snails, disease, temperature, wind and solar radiation. All these factors can affect the level of output a farm is able to produce hence affecting the price of the rice.