Commodity Markets Rely on Insider Info
Constantin Lucas2 min read·1 hour ago--
This isn’t to discourage anyone from going out there and trying to make it in the commodity markets. But this is a hint to push you in the right direction.
Let’s take agriculture for example. It’s very difficult to trade ag commodities without any knowledge of the fields.
If you don’t know anything about corn yields, seasons, temperature impacts, sale cycles, or anything else, it’s going to be extremely difficult to make any money by betting on the price.
However, if you go out there and build relationships with farmers, and transportation experts in the industry, and surveyors, and land owners who value their land based on the potential for crop yield, it’s going to give you a decent idea of where we are in the market cycle.
If you then go a step further and study the economic side to this equation, and learn about futures, risk management, and the inflows of capital…again, it’s going to be tough for it to have a negative impact on your speculation.
Crops are notoriously known for “insiders taking advantage”. But are they really insiders? If someone hires a team of agricultural analysts to read through USDA reports, compare historical seasonal data and go for meetings with farmers, how are they an insider?
You could’ve done that.
This is one of the few industries that (barring a black swan frost/freeze event) it’s very hard to be completely wrong once you understand the nature of the crop.
So, continue building your base of knowledge, build relationships with those in the field, put boots on the ground, and you’ll find that your trading will likely catch up to your knowledge gap being filled.
