Trading has existed since the early times of human civilizations. It is the main way by which people are able to acquire their needs, make a living and also survive. In this day and age, many types of trading have been born and have been booming. One of them is commodities trading.
Commodities trading is the buying, selling and trading of raw materials. It plays a huge role in the economic sector. Truth be told, it is the first type of trading to exist since barter was the main way of procuring goods back then.
The place where it happens is called the commodity market, which could be online or offline. While taking part in the commodity market was quite difficult, expensive and selective in the past years, these days, there are many ways and possibilities for you to join in it.
Commodities are the items or materials being traded with other materials of the same grade. Oil, grains, coffee and gold are some of them, and you will know more from the list that follows.
Classifications and Types of Commodities
The two major classifications of commodities are hard and soft. Hard commodities are natural resources that are mined, extracted, collected and processed. Soft commodities are grown, raised and harvested. Because of the unpredictability of both categories of commodities, monitoring and analyzing weather shifts and labor regulations of various countries are crucial for traders and investors. They are produced in huge quantities, so in-depth studying and analysis will be important.
All commodities are valuable because they are used in the production of humans’ biggest necessities, namely food, clothing and energy. Whoever the producer or supplier is, the prices of the commodities are the same.
Now, talking about commodities, there are 4 major types.
1 – Agricultural Products
These are crops planted, raised and harvested by farmers. They are to produce food and also fuel. Crops that are annually harvested fall in this category. They are unprocessed materials. Grains like wheat, rice, soybeans, coffee beans, oats and corn are agricultural commodities. Cocoa, sugar and coffee, which are some of people’s favorite drinks, are also considered under this commodity type.
2 – Livestock and Meat
Sometimes mistaken or used interchangeably as agricultural commodities, livestock commodities are resources that animals raised in an agricultural setting produce. They could be food and various services. Livestock commodities include cattle, beef, pork, eggs, milk, poultry and meat.
3 – Energy
Energy products refers to various sorts of coal, oil, and gasoline-derived products. Coal, green power, diesel, propane, unleaded, ethanol, crude oil, Brent Sea Oil, heating oil, natural gas and electricity are energy commodities. Of course, they are utilized to operate appliances, transportation and other important products of technology.
4 – Metals
Last but definitely not the least are among the most popular types of commodities all across the world. They are none other than metals. They are produced by processing mined ore and are also divided into two main types: Industrial Metals and Precious Metals.
Industrial metals are what people commonly use on a daily basis. They are used in industrial activities, such as processing and manufacturing different products in huge quantities. Copper, aluminum, stainless steel, lead, zinc, nickel, iron and tin are among them.
Precious Metals are dearer because they are considered rare metals that are hard to acquire. They are often invested on, bought or kept for the safety of capital or for profits. Gold, silver and platinum are obviously the most famous, most sought after and most expensive in economic value. Other precious metals include palladium, rhodium, osmium and iridium among many others.
Commodities trading is certainly one of the most well-known and acknowledged types of trading all over the world, and it shows no signs of stopping anytime. Of course, the materials traded in commodities trading are the necessities of humans – from food,
garments to energy and other daily resources. It surely is one essential trading that means a lot to investors and traders alike.