What are Canola Futures?
As per the USDA, Canola is the second largest oil crop in the world. Canola oil comes from the canola seed—which is a genetically modified variety of the rape plant.
Canola futures have been trading since 1963, and as Canola oil’s demand as a healthy cooking oil and biodiesel has grown around the market, it’s futures have become more desirable as well.
Canola futures help producers and marketers to manage the risk of price fluctuations in the canola oil market. A canola future is a standardized contract that is traded on an exchange between two parties. The buyer of the contract agrees to accept delivery of a specified quantity of canola at a predetermined price at a future specified date. The seller agrees to supply such a quantity as per the contract.
Canola futures serve as the world benchmark for canola trading prices. Investors have a small but growing interest in Canola futures. Canola futures offer traders a chance to enter a less competitive futures market, but they should keep in mind that less competition means that canola is a relatively less liquid market as well, when compared to other futures.