InvestorQ : Do duties and government restrictions also impact agri commodity prices?
Arti Chavan made post

Do duties and government restrictions also impact agri commodity prices?

Answer
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2 years ago


In fact, governments tend to be quite sensitive about the prices of agri products. They don’t want a sharp rise nor do they want too much volatility. Firstly, duty structure makes a lot of impact on landed prices in various countries. Many countries tend to impose restrictions on imports of certain agri commodities to protect the interests of the domestic producers. This tends to distort the price as also the demand patterns for these agri commodities.

Secondly, the governments also impose restrictions on futures trading in select agri products. This is quite common in India. We have seen governments in the past intervening and banning futures trading in agri commodities that are politically sensitive. Similarly, governments also closely monitor accumulation of open interest in agri commodities if it has the propensity to impact the price of the agri commodity.