How are commodity prices set?
expand The price of agricultural commodities, such as corn and soybeans, are set in open market trading, where buyers and sellers come together at exchanges such as the Chicago Board of Trade. This firm brokers large quantities of certain products through futures contracts. Corn, for example, is sold through 5,000 bushel contracts. The contract stipulates that the corn will be delivered to the contract holder on a specified date in the future. Commodity buyers bid on these contracts to ensure they have a reliable supply of corn at a predictable price. Speculators may also bid in hopes that the value of the corn increases before the contract comes due. The buyers consider factors such as the weather, the number of acres planted and the anticipated demand for corn as they bid. Local grain elevators use these bids as a guide to determine what price they will pay area farmers for their crop. Farmers can sell at the price offered by the elevator, or store the crop in hopes that the price wi
