You can invest in grain via three methods: by purchasing shares of agricultural manufacturers; purchasing an exchange-traded fund, or ETF, focused on grain; or by taking a long position in a grain futures contract. The last one is the best choice, because as it is the most direct investment in a specific grain of your choice. If you buy stocks, the stock price may not perfectly mimic the supply and demand dynamics of grains, and ETFs will limit your choices.
A futures contract is a legally binding agreement to buy or sell something at a particular price on a future date. If you are long, you agree to buy, whereas the party who is short is agreeing to sell. By agreeing to buy a grain, such as wheat or barley, at a particular price, you are essentially betting on a price increase. If, for example, you agree to purchase wheat at $5 per bushel, and the market price on the date of the purchase is $5.10, you can immediately sell your holdings at a profit of 10 cents per bushel.
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