Examination of Risk Management Strategies for the Use of Future and Spots Prices of Agricultural Commodities

This study examines risk management strategies for agricultural commodities using futures and spot markets. The research analyzes price trends, investigates the relationship between futures and spot prices, assesses the impact of futures contracts on risk management, and analyzes the risk-return tradeoff of using futures in selected agricultural commodities. Using 3-5 years of historical price data for cardamom, mentha oil, CPO bales, cotton, and natural rubber, the study employs quantitative analysis including descriptive statistics, regression, correlation, and Sharpe ratio calculations. Results show significant price volatility, strong positive correlations between futures and spot prices, and a significant positive effect of futures contracts on risk management metrics. Natural rubber and mentha oil offer the most attractive risk-adjusted returns. The findings highlight the importance of futures markets in managing agricultural price risks and provide insights for developing effective risk management strategies in the sector. Keywords: Agricultural commodities, futures markets, risk management, price volatility, hedging strategies