Tradable commodities are goods that can be bought and sold and are interchangeable with other similar goods. They are usually traded via future contracts and are divided basically into four groups, consisting of metals, energy, agriculture, and livestock. They are purchased through contracts at prices that have been pre-determined and then sold when the prices of those goods go up. Since the advent of the Chicago Board of Trade (CBOT) in 1848, many additional exchanges have been established around the globe. Compared to stocks and bonds, trading in commodities can be highly profitable. Here are some details about different types of trading commodities from each of the major trading groups.
The energy sector accounts for some of the commodities that are the most influential and the most frequently traded. They can be any type of product that produces energy that gets hot or is used to create power used in industry and companies as well as private homes. The types of products traded care heating oil, crude oil, natural gas, propane, coal, and petroleum. Since the costs are according to the volumes of contracts, their prices can be either lower or higher, depending on volumes. Biofuels are one of the newer commodities and they are gaining strength as they rise in popularity.
Livestock is one of the commodities traded under the category referred to as meats. Among others, the products traded include pork, beef, and mutton. The Kansas City Board of Trade, in Kansas City, Missouri, houses the main exchange forum for livestock and is referred to as the KCBT. Compared to other types of commodities, livestock can be extremely volatile. Much of the value of this market is linked to the price and availability of grains, which of course are needed for feeding the livestock.This is why grains are the second most popular of all commodities. Along with agricultural produce, soybeans, corn, rice, wheat, and maize are included in this category.
The most traded type of commodity in the market is metal. There are several classifications for metals such as the non-precious metals, alloys, base metals, precious metals and those used for scrap. Precious metals are far and wide the most popular metals traded. They include silver and gold, which are usually traded at a price in USD per ounce. Other precious metals are platinum, ruthenium, iridium, rhodium, and palladium. Traded base metals are lead, zinc, copper, nickel, aluminum, and tin. These base metals tend to oxidize and corrode when accompanied by acid. Carbon steel is an ally that contains carbon and makes for successful trades. Scrap metals are popular because they are easy to find and can yield good profits.
This category includes such items as sugar, cotton, and cocoa. The exchange where they are usually traded is called the Coffee, Sugar and Cocoa Exchange (CSCE). Frozen orange juice concentrate is traded with the tag of Frozen Concentrated Orange Juice (FCOJ) in the market. Rarely, the concentrate is traded on the New York Cotton Exchange market.
World Commodities by Country
Click to enlarge
Rules for Successful Trading