How to Make Money from Corn for Investors

Corn has become a part of our lifestyle. Watching a movie is incomplete without popcorn. Healthy breakfast? Cornflakes are the main choice of cereal. Family gathering in Puncak is best accompanied by warm roasted corn. Afternoon tea, delicious while snacking. Crispy Corn Fritters? That's enough, don't think about it anymore.

This time, we want to discuss one fun fact of corn that not many people may know: profit opportunities for the community!

If we usually associate profit opportunities from corn commodities with farmers, warehouses, distributors, and other actors in the trade chain, the community can participate in obtaining profits from corn through futures contracts.

Corn Price Drivers

Corn Futures Contracts: Solution for Corn Price Fluctuations

Uncertain price = risk of loss

Corn farmers are worried if the price of corn drops at harvest because supply becomes high and demand remains or even decreases. Corn exporters and packaged popcorn manufacturers are also concerned about rising corn prices. This is where futures contracts come as a means of hedging for corn farmers and consumers by securing corn prices for the future.

In addition to hedging, when this commodity is available in the form of a futures contract, the corn futures contract has become a financial instrument in the asset market. Thus, anyone can also take the opportunity for speculative purposes (to profit from the corn price movement).

In addition to earning profits, the emergence of speculative traders will add liquidity to the corn futures market. Thus, all parties involved in the futures market can have more options available for price discovery and find a suitable price from the buyer/seller.

How Corn Futures Contracts Work

The price paid and the nominal received can be estimated by calculating the basis (price difference).

BASIS = spot price - futures price

If the basis is negative, it means that the current price is cheaper than the future price. Vice versa. To understand how corn futures contract works, take a look at the following illustration.

Get to know more golden opportunities in other commodities and fulfill your curiosity on the futures market through our articles HERE