The grain stock market also known as the grain trade market in Australia, is one of the oldest commodity markets in the world, having been established several thousand years ago, with historical estimates suggesting that grain trade markets predated civilization. Despite its considerable longevity, the grain market is however, also one of the most volatile commodities markets, offering grain traders high risk and high reward opportunities to accrue substantial financial gains, together with the prospect of suffering financial losses for poor trade decisions. The volatility in the market coming from supply and demand fluctuations and adverse farming conditions such as droughts and storms which can have significant impacts on crop production.
In order to participate in the Australian grain trade market and effectively trade grain stocks, ensuring continued profitability with trades and investments, it is important to understand the process and how the grain stock market works in Australia, and the numerous opportunities and trading platforms that exist.
We take at how to trade grain stocks in Australia, and discuss the background to the grain trade market, as well as the various market options that are available for trading.
Overview of the Australian Grain Trade Market
The grain trade market in Australia, which in more recent years has also encompassed organic grain trading, is purely focuses on the commodity of grain. Trading commodities, involves the exchange of assets, so in terms of grain in involves the buying and selling of grain, predominantly via futures contracts. Like other commodities such as oil, food and metals, grain is a natural resource, with commodities frequently considered ‘building blocks’ of the of the Australian economy. With the grain trade market, a strong, complex web, for traders to navigate.
The process of commodity trading was established prior to the financial markets in which form the basis of trading today, with today’s modern commodities market far more sophisticated, operating on a global scale, and generally available for trades 24 hours a day, throughout the standard working week.
Many commodity traders, chose to focus solely on the grain trade in Australia, due to the complexity of the market. Grain trading can be an extremely profitable business, particularly for experienced grain traders who are well researched and who make sound, carefully considered trades. Grain traders also need to carefully weigh up the risks in addition to the other variables that can have a significant impact on the market.
Factors that affect the grain market in Australia
In our recent article, How do Grain Market Prices Work In Australia, we explored the factors that affect the grain market in Australia. These factors, supply demand and growing conditions have significant impacts upon the grain price. These factors again are an essential part of the market, and it is vital that traders have a thorough understanding of the risks that these factors can have on the market, and subsequently on their investment and grain trades. Traders should always ensure that these risks are factored into their trades, making clear and logical decisions based upon market trends, including pricing trends.
The futures market – a key factor in the grain stock trade
As previously stated, futures contracts are the most common form of grain trading in the Australian grain market and are the method that most traders use. As the term suggests, futures contracts do in fact involve the future. Futures contracts are, therefore, not a physical market, with futures trading essentially involving speculation surrounding the price of the commodity when the contract is delivered, in the future.
Experienced traders are well versed and have an in depth understanding of how to trade grain futures, with the buying and selling of the grain stocks process completed using a number of active exchange platforms across the world through futures exchange accounts. Grain trade Australia in relation to futures contracts can occur via the Sydney Futures Market, with markets also located in the US, namely the Chicago Board of Trade, and in Europe via the London Commodity exchange.
Alternatives to trading futures contracts
Whilst futures contracts may be the most common way to trade grain stocks ion Australia, there are several other ways in which traders and investors alike, can get involved in grain trade in Australia, as explained below.
The first alternative to futures contracts is Exchange Traded Funds also referred to as Grain EFT’s. This trading process is relatively simple and is more readily accessible to small scale traders and investors, with the process requiring a minimal outlay, with investors not required to have an established futures exchange account. Investors in grain EFT’s invest in grains themselves rather than the contracts that accompany the trade process.
A further alternate option for grain traders in Australia is to invest in grain stocks, which is the process of buying shares in companies that directly process and produce the grain. In Australia the largest grain stock company is GrainCorp. Again, the fact that investors and traders do not have to delve deep into the depths of commodities trading and have established futures exchange accounts in order to participate in the market makes this another attractive option for those looking to entre the grain trade market.
Grainwise & grain trade Australia
Grainwise, is a grain marketing company, offering easy and effective solutions to engage growers with buyers, with the goal of maximising efficiency and profits for both growers and investors. With extensive market understanding and knowledge our dedicated team of grain brokers, are across all aspects of the grain trader market and regularly provide sound advice.
Our website also provides grain trader in Australia with access to live grain market prices, a valuable resource for traders, growers and investors, ensuring you can remain up to date on the latest market information, and trends, as well as live pricing.
With the grain trade in Australia providing the perfect platform for traders to secure large returns, Grainwise and the information, and support we can provide as a grain brokerage, can ensure that you not only have access to the most up to date grain market information, but are aware of the opportunities that exist within the industry and the risks involved with each grain stock trading option.
If you are looking for some further guidance in relation to how to successfully trade grain stock in the Australian grain market, give one of our brokers at Grainwise a call today, we would love to give you a hand!