Commodities Marketing Essay Example | Topics and Well Written Essays - 1500 words

Commodities Marketing - Essay ExampleCommodity outputs such as metals, fuel, and agricultural products perk up a much higher jeopardy in this regard (Damodaran 2008). This is why any manager running an agricultural business should be sufficient to manage these risk in order to help he business to navigate all the sequences in a year without being brought done by the changing prices. spirit of risks for an agriculture business The kind of risk that an agribusiness faces is not just tied to the prices of the commodity it sells. It is also related to the price changes in the upgrade inputs (Damodaran 2008). If the farm inputs increase in price in a dramatically short time, the business will throw to receive this shock and may not be able to sell its products at a price that will return its embodys of production and give the business a profit margin. One social function that is most necessary to understand about agriculture products is that they have at least two main character istic that expose them to the risk of price change. These be as follows Affected by weather and seasons The seasonal nature of agricultural commodities is something that affects the way the products navigate through the market during the calendar year. For instance, during the time when there atomic number 18 too many tomatoes in the market, prices of the tomatoes will go down and this can affect the farmer because the famer (agribusiness man) may not be able to recover their cost of production. ... If the farmer is farming vegetables and fruits, the farmer can use green houses and be able to deliver the goods to the market during the time those particular goods are out of the season and thus be able to have an upper hand in demand and supply equation. There are on the other hand non-homogeneous issues in regard to this. To begin with, not all the agribusiness products can be cushioned from risk in this way. Secondly, even for those products which can be headed in this way, they would still need more hedging because this does not guarantee that the markets will be stable. This therefore means that the farmer may still need to border their business farther using more formidable means of risk management tools. Perishable goods Most agricultural goods are perishable and therefore have no long shelf life in which to wait for the products to wait for the price shock to pass. For instance, once vegetables reach their time to be harvested, they have to be harvested as soon as possible, or they will go bad. At the same time, once they are harvested, they have to be moved immediately onwards they expire. This leaves the farmer at a disadvantage and may make them to be vulnerable to the forces of demand and supply. Substitute products To add to the risk of the perish-ability, most of the agricultural goods have substitute products in the market and agricultural products can be replaced by so many other products. This leaves the consumers with a choice to choose the substitute product with the lowest price tag on it. From the side of the farmer, though this is not ideal because it leaves the farmer in a position where they are not able to negotiate for a better price. This makes