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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities

Which of the following factors is most likely to cause a rise in the price of an agricultural commodity such as soybean, other things being equal?

A reduction in sown area combined with a poor monsoon is most likely to lift soybean prices because it reduces supply while demand stays steady. Bumper harvests, weaker exports and release of government stocks all push prices down by raising availability or lowering demand.

  1. AA bumper harvest due to a good monsoon
  2. BA fall in export demand
  3. CA reduction in acreage and a poor monsoon reducing yieldCorrect
  4. DAn increase in stock held by government warehouses released into the market

Explanation

Lower acreage and poor yield reduce supply, pushing prices up when demand is unchanged. A bumper crop, lower export demand and stock release all increase supply or reduce demand, tending to lower prices.

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