A derivative which has an agricultural produce (agricultural commodity) as underlying asset. Unlike financial assets, agricultural commodities are valued based on their future expected spot prices rather than future expected cash flows. For example, the value of a futures contract on wheat is based mainly on expected future spot prices of wheat and the storage costs of holding this commodity. Furthermore, seasonality affects commodity prices as there arises a mismatch between production by harvest and consumption in an industrial process.
Some commodity derivatives can be classified as agricultural derivatives.
