Commodity trading is said to be one of the oldest professions in the world. In the past, our ancient ancestors traded goods in a different light as compared to the commodity trading of today. These commodities included food and culinary types, such as spices, vegetables, and livestock. They also exchanged material products, such as gold, seashells, and natural stones.
Eventually, the currency was developed through time. Today, we buy and sell commodities through the value of money. Additionally, over the past 20 years, the global commodities marketplace has evolved into what it is today — an aptly called ‘supercycle,’ which is the rise and fall of products relative to their prices.
In the following section, we’ll cover what the commodity market entails, and more about its commodity types, tradeable commodity categories, and trading standards.
Types of commodities
In a nutshell, commodities are sorted into two parts — hard and soft. While hard commodities pertain to natural resources, soft products refer to agricultural goods and livestock. Let’s take a look at each:
- Hard commodities: They are said to have a long-standing position in the economy. A perfect example of this is oil, which requires to be traded and exported to meet every country’s oil demand.
- Soft commodities: They are more flexible as a product. Think about the likes of livestock and agricultural products because they are always in demand.
Ultimately, understanding the difference between hard and soft commodities can help you know which one is worth trading.
Categories of tradeable commodities
At this point, you now should have already been dealing with commodity trading. Nevertheless, it’s best to have a deeper understanding of what tradeable commodities include. Know that there are several specific categories of tradeable commodities, such as the following::
- Metals: These include gold, silver, platinum, and copper.
- Energy: These consist of crude oil, heating oil, natural gas, and gasoline.
- Livestock and meat: These are lean hogs, pork bellies, and live and feeder cattle.
- Agriculture: There are corn, soybeans, wheat, rice, cocoa, coffee, cotton, and sugar.
Knowing these categories gives you a basic understanding of what trading entails and what specific category you would like to invest in.
Commodity trading standards
If you want to successfully engage in trading commodities, every trader is required to abide by the rules and regulations that are set in place for commodity trading. An excellent example is how the government regulates safety standards in the food-manufacturing industry. Of course, you would want to trade in agricultural products and trade livestock that aren’t sick.
Ultimately, know that each country has its own set of laws and regulations, as far as trading commodities are concerned. For this reason, familiarize yourself with them before setting out on any investment plans.
Final words
The global commodity marketplace has drastically evolved over the years, which is why it cannot be denied that there are many complexities in the commodity industry. If you run a business or deal with trading commodities, you will have to dedicate a large part of your life to understanding its complexities, complying with the standards, and keeping up with the changing demands of the industry so that you can thrive and succeed.
BLK Global is specialized in online commodities, raw materials, and industrial supplies. If you are a manufacturing business, a wholesaler, or a retailer looking to optimize your supply chain, contact us today to see how we can help!