What are Commodities

WHAT ARE COMMODITIES?

Commodities are raw materials that can take the form of merchandise. This differentiates commodities trading from foreign currency exchange or stocks, which are less tangible mediums in which to invest. Commodities come in two main categories. Hard commodities are products extracted from the earth such as oil, while soft commodities are items which are grown (crops), or bred (livestock). It is possible to narrow the categories down further into four distinct groups.

Metals & Energy

Metals

Metals

Metals

Regular metals such as aluminium and copper, along with precious metals which include gold and silver.


Energy

Various types of oil and natural gas, including Heating Oil, Brent Crude and Nymex Crude.

Meat and ​Livestock & Agriculture

Energy

Wheat

Meat and Livestock

Live Cattle and Lean Hogs are among the sort of livestock traded in this category.


Agriculture

This category includes all items that are grown, such as grains like wheat and corn as well as other products like cotton and coffee.

What is Commodity Trading?

What is Commodity Trading?

What is Commodity Trading?

What_is_Commodities_Trading

Commodity trading goes a long way back in time to the ancient system of bartering, but these days it’s somewhat more sophisticated. The price of commodities can by affected by events at a local or even at an international level. The weather, disease, war and good old fashioned supply and demand are just some of the factors that can influence price.

A good example from 2014 comes from the market for coffee. Brazil is the planet’s most prolific producer of Arabica coffee beans. A Brazilian drought at the start of the year sent coffee future markets soaring, sending prices to a two year high, before a significant level of rainfall in November 2014 saw them drop.

Another example is the rise in oil prices in the early months of the same year, after terrorist organisations issued threats to a number of leading oil-producing nations. The fear that oil supplies would become scarce saw prices soaring, yet later on in the year the easing of such supply worries, along with a boom in American Shale Gas and drop in Chinese demand, resulted in the price of oil falling by almost half.

These events demonstrate just how important a good knowledge of current affairs can be for traders, particularly when it comes to areas which relate to the markets that they might trade in.

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