Everything you wanted to know about commodity trading.
How Oil Became The Worlds Most Valuable Commodity [Plus Global Oil Consumption Clock]
Integrated Nano-Science and Commodity Exchange (INSCX)
From Billionaire To Broke: How 8 People Lost Everything
How To Master The Bullish Engulfing Pattern (Example Chart Included)
Hammer Candlestick Formation in Technical Analysis: A Definition With Chart Example
How To Use An Inverted Hammer Candlestick Pattern In Technical Analysis
MACD Indicator For Trading: Heres How To Interpret It
Agricultural Commodities: Find The Top Agriculture Investment Resource Here
What Are the Different Agricultural Commodities?
What are the Main Global Agricultural Trends?
What Are The Top Agriculture Investment Resources?
Agricultural commodities are staple crops and animals produced or raised on farms or plantations. Most agricultural commodities such as grains, livestock and dairy provide a source of food for people and animals across the globe.
However, some agricultural commodities have purely industrial applications. The building and furniture industries use lumber from trees, while manufacturers in several sectors use latex from the rubber tree. Wool from sheep provides fabric for the clothing industry and lanolin for skin- and hair-care products.
Some agricultural commodities serve as both a source of food and an industrial ingredient.Both humans and animals consume corn, but the commodity is also an important ingredient in fuel production. Similarly, humans eat the beef of cows, while a variety of industries use beef hide, fats and bones to create products.
Virtually every living being on the planet depends on the agricultural industry in one way or another. We eat the grains, fruits, vegetables and livestock that farmers produce; build the frames of our houses from lumber; make clothes from cotton and wool; and ride in cars with tires made from rubber.
In addition,over 1.3 billion people nearly 20% of the global population work in farming.In some regions of the world, such as South Asia and Sub-Saharan Africa, farming employs more people than any other industry.
The global impact of the agricultural industry is enormous. According to the Food and Agricultural Organization of the United Nations, theeconomic valueof theagriculture industry, in constant 2010 dollars, ismore than$3 trillion.
With theworld populationexpected to climb from 7.5 billion to 11.8 billion by 2100, agricultural commodities are likely to play an even bigger role in the decades ahead.
Agricultural commodities fall into one of six categories:
Farmers grow these commodities as (a) a food source for humans, (b) a food source for animals and (c) as a feedstock for fuels (in some cases).
The most common grain commodities include the following:
Grain commodities often serve similar purposes. For example, corn, oats and barley all function as food sources for livestock. Depending on price, farmers will choose one grain over the other.
As a result, most grain commodities have a strong price relationship with one another.Traders monitor the spread between grain prices to determine the relative values of one grain versus another.
These commodities resist easy classification since they serve multiple purposes. Farmers grow them for (a) the high oil content in their seeds and (b) the meal that remains after oil is extracted:
In the case of cotton, the plant fibers have their own important market in the clothing and houseware industries. Because farmers use the meal from these crops in animal feed,oilseeds often have a strong price relationship with cereal grains.
Meat commodities include (a) live animals raised for meat, hide, organs, bones and hooves and (b) cuts of meat produced during the butchering of animals:
Dairy commoditiesinclude milk, butter, whey and cheese.Marketsfor these commodities date back to the 19th century when traders organized the Chicago Butter and Egg Board. Today these products trade on the Chicago Mercantile Exchange (CME).
Soft commodities refer to commodities that are farmed rather than mined. However, most commodity traders classify cereal grains, oilseeds, dairy and meat separately.
The remaining soft commodities all have developed and liquid global markets:
Some commodities have well-developed global markets, but dont fit easily into the above categories:
Several long-term trends could create investment opportunities in agriculture over the next two decades:
By 2040, the worlds population is expected to exceed 9 billion.Demographers forecast that three-quarters of the world will reside in Asia or Africa at this time.
Not only will population increase, but people will be richer. Most analysts agree that the greatest wealth gains will be in the developing world where people will migrate from rural areas into cities. Wealthier global citizens will mean more demand for agricultural products.
These trends could place strains on agricultural resources. Innovations in irrigation, biogenetics and land usage are among the many advances that will be needed to help feed a growing population. These innovations could produce new investment opportunities.
Emerging market economies have been growing at a much faster pace than developed economies over the last decade, and this trend is likely to continue.Seven countries Brazil, China, India, Indonesia, Mexico, Russia, and Turkey accounted for 24% of world economic output between 2010 and 2016.These countries comprised only 14% of global output in the 1990s.
However, despite these gains, productivity in agriculture is lagging badly in the developing world. A report by the Global Harvest Initiative (GHI) shows that productivity by small farmers in the lowest-income countries is growing at 1.3%. The average rate of productivity growth across all countries is 1.73%, which isbelow the 1.75% level needed to keep up with global demand.
To keep up with the demands of a growing world population, theagriculture sectorin thedeveloping worldwill need to increase its efficiency. Investors may find opportunities toinvest in industriesthat help modernize small farms.
Technology is one way that farms can drive productivity gains. Technology and Big Data are increasingly driving decisions by farmers.Crop monitoring technologies, apps that tell farmers the optimal time and place to plant crops and advanced DNA testing of livestock are among the many technological innovations in farming.
Modern farms will need to integrate thelatest technologiesinto their operations in order to boost productivity and take on competition. However, in many areas of the developing and some areas of the developed world, there is a severe skills gap.
In order to bridge this gap, farms of the future will have to recruit an educated and technology-savvy workforce. Investors may find opportunities to invest both in the technology that farmers use and the human resources to help them employ it.
With annual spending of more than $300 billion annually,China is the largest meat consumer in the world.Meat consumption has been growing for the past two decades, and analysts expect growth of 3 to 4% annually for all proteins in the years ahead. The rising middle class in China is the main catalyst for this growth.
This trendwill have enormous implications for global agricultural markets. China will require more grains to raise livestock and may need to import them. In addition, China is planning to invest heavily in the infrastructure required to modernize production and processing plants for beef, pork, poultry and fish.
Gradual changes in global temperatures can increase the number of severely hot days in the growing season. These heat waves can dramatically reduce crop output and create price spikes.
Farmers are using genetics to develop more heat-resistant strains of crops.Investments in biogenetics may benefit as a result of increases in global temperatures.
Traders can follow the broad agricultural market by monitoring the performance of some of the main indices that track the sector.
The following agriculture indices are a good barometer for investment demand in the sector since they measure the performance of agricultural commodity futures.
This sub-index of the S&P GSCI provides investors with a reliable and publicly available benchmark for investment performance in the agricultural commodity markets.
Dow Jones UBS Grains Sub Index Total Return
Index composed of three futures contracts on grains traded on US exchanges.
Index composed of seven futures contracts on agricultural commodities traded on US exchanges.
Index composed of two livestock commodities contracts (lean hogs and live cattle) traded on U.S. exchanges.
The first investable commodity index to provide direct exposure to food. The index tracks the collateralized returns generated from a basket of 11 agricultural and livestock futures contracts spread across three constant maturities from three months up to one year.
What Are The Top Agriculture Investment Resources?
Investors can find additional information on investing in agriculture from the following sources:
TheEconomic Research Service(ERS) of the USDA provides comprehensive information on agricultural commodities including production, consumption and import and export statistics. The ERS also offers forecasts and analyses for each agricultural sector and publications and reports on a vast array of agriculture-related topics.
This United Nations agency has over 194 member states and a presence in over 130 countries. TheFAO websitepublishes reports and statistics on a broad spectrum of agricultural topics. The FAOSTAT database is an excellent tool for analyzing and comparing agricultural data using dozens of different variables (e.g., countries, production, trade, prices, land use, etc.)
Industry group websites are a great way to learn about the different sectors of agriculture. These organizations publish timely content on issues that impact their sectors (e.g., trade, government regulations, conservation initiatives, etc.).National Pork Producers CouncilNational Corn Growers AssociationNational Cotton Council of AmericaandInternational Rubber Study Groupare just a small handful of the of the organizations that advocate for their sectors.
This website, powered by Farm Journal, has comprehensive current content on agriculture topics. Agweb aggregates news stories, market data and government reports on the sector. It also publishes market analyses and discussions on weather, crops, agribusiness, machinery, livestock and technology.
This American financial company operates futures and options exchanges including the Chicago Board of Trade (CBOT) and the New York Mercantile Exchange (NYMEX). The CME publishes dailyvolumeandopen interestreports for agricultural commodities, educational courses on agricultural commodities trading, trading tools, brokerage resources and much more.
One of the leadingCFD brokersfor trading agricultural commodities, like corn and wheat, isPlus 500. Heres why:
No commission on trades (other charges may apply)
Trade corn, wheat and hundreds of other markets
Your funds are safe publicly listed company regulated by the UKsFinancial Conduct Authorityand CyprusSecurities and Exchange Commission
Start Trading at Important: Your capital is at risk. CFD services are suitable for experienced traders only.
One of the leadingCFD brokersfor trading commodityCFDs, like corn and wheat, isPlus 500. Heres why:
No commission on trades (other charges may apply)
Trade corn, wheat and hundreds of other commodity CFDs
Your funds are safe publicly listed company regulated by the UKs Financial Conduct Authority and Cyprus Securities and Exchange Commission
Important: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail trader accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.
© 2010-2018Commodity.com LLC, 1013 Centre Road, Suite 403S, Wilmington, New Castle, Delaware, 19805.
The data contained in this website isnt real-time or necessarily accurate, meaning prices are indicative and not appropriate for trading purposes. Your capital is at risk. This website is intended as a source of information only, not financial advice. Under no circumstances should you trade commodities, select a broker or perform any other task connected with commodity trading without taking professional advice first. Commodities can fall in value as well as rise in value: substantial losses can be made commodity commodity trading or trading with CFD services.
Plus500UK Ltd is authorised and regulated by the Financial Conduct Authority (FRN 509909).