CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Investing in Agricultural Commodities With CFDs: What You Should Know

Andrew Moran - Writer for Fortrade
By Andrew Moran
Joel Taylor - Editor for Fortrade
Edited by Joel Taylor

Updated February 22, 2024.

Price chart graph showing the price and percentage of increase in price for corn.

In today's environment, agricultural commodities are one of the popular markets to trade, as there is a lot of information and global developments to comb through, be it the price of corn or soybeans.

A great method for approaching agricultural commodities is through contracts for differences (CFDs), which will then require coming up with a trading strategy, from opening and managing to closing positions, while also reducing the risk of potential losses.

Although using CFDs for trading agricultural commodities can be an effective strategy, you should never do so lightly. It is crucial to employ a workable strategy that incorporates a variety of factors, including risk tolerance, capital, preferred methods, and personal experience.



CFD Trading & Agricultural Commodities

CFD trading lets people trade with the prices of future market movements of underlying instruments without ever owning the asset or taking physical ownership.

CFDs are simply contracts between investors and financial institutions whereby the former adopts a position that pays the difference in the settlement between the open and closing trades. You are simply tracking the price of a real product, which makes it easy to trade the security, complete a trade, and simply go long or short.

So, if you are waiting for the US Department of Agriculture (USDA) to drop its latest grain report and you are anticipating a higher-than-expected inventory level, you will speculate that the front-month contract price for corn or wheat will fall (go short).

Despite their simplicity and ease of use, CFDs have potential risks like any other investment tool, mainly because there is the possibility of liquidity issues and the threat of constantly maintaining sufficient levels of margin because of leveraged losses. This is why it is crucial to develop an exceptional trading strategy.

What Are Some Agricultural Commodities to Trade?

  • Coffee: Coffee is a highly volatile agricultural commodity since the coronavirus pandemic, especially with production challenges emanating in multiple markets.
  • Corn: Corn attracts a lot of attention and is easy to trade based on hefty trading volumes.
  • Soybeans: The soybean market is one of the most liquid aspects of the agricultural commodities market.


How to Invest in Agricultural Commodities With CFDs

1: Find a CFD Brokerage & Open a Trading Account

Like every other consumer-related decision, whether you are in the market for auto financing or a new mortgage, it is imperative to do your research before you select a CFD brokerage and open an account.

You need to scan the marketplace before making a decision and search for how long the brokerage firm has been open, what fees you can expect to incur, and what account minimums there will be.

2: Choose Agricultural Commodities to Invest in

Although online trading platforms will offer a limited number of agricultural commodities, it is still important to focus on one or two agricultural commodities rather than trading the entire market.

You need to have some experience with one, or, at the very least, possess sufficient knowledge about what factors can influence the asset (geopolitics, economics, industry reports, weather, and other components).

3: Check Out Our Trading Platform

Now that you are going all in on the agricultural commodity, you will need to monitor the situation since it can be rather fluid, whether it is combing the headlines or studying the charts.

In addition, it is also prudent to speak with a senior account manager to confirm the trading conditions.

» See our demo account and real account options

Are Agricultural Commodities a Good Investment?

As a long-term investment vehicle, trading agricultural commodities is not a great strategy. You are better off purchasing dividend-paying stocks or index funds if you want to hold something for longer than five, ten, or 20 years.

However, there are many possibilities when you are involved in the buying and selling of agricultural commodities if you do so for day trading or swing trading purposes.

This is not something for passive investors—you need to be active because a broad array of day-to-day developments could influence the price, from political upheaval in South America to colder temperatures in the US Plains.