Education / Commodities/ Types of commodities

Commodities can, in fact, be divided into many groups.

Grown, such as agriculturalproducts. Beans, sugar (cane), rice, oats, corn and wheat are examples of those products that are grown on the ground and are the representatives of the grain complex. Grains and soybeans are essential to food and feed supplies. Their prices are sensitive to weather conditions in growing areas during a crop's development and to economic conditions that affect demand.

Coffee, cacao and palm oil are considered tropical products. Grain futures trading takes place primarily at the Chicago Board of Trade, the Minneapolis Grain Exchange, the Kansas City Board of Trade, the Winnipeg Commodity Exchange, and the Tokyo Grain Exchange.

Other products are grown or produced by farmers, they are products such as cattle, pigs and poultry. Prices of these commodities are affected by factors that influence the number of animals born and sent to market, such as prices of feeds and other inputs or diseases, government regulation of the sector. The primary marketplace for futures on cattle is the Chicago Mercantile Exchange. Livestock and meat futures have always been quite popular among self-directed, individual traders.

The next main group of commodities is natural resources found in the ground. The group contains energy, industrial metals and precious metals.

Energy means oil, gas, coal, nuclear energy and electricity made by burning fossil fuels. Oil, as a commodity, includes different forms of crude, but it also includes oil products, such as refined products (heating oil and gas oil) and even equivalents (gasoline, jet fuel, etcetera).

In today's world energy futures are important barometers of world economic and political developments and are watched carefully by investors and traders worldwide. Energies are traded at various exchanges, including the New York Mercantile Exchange, the Tokyo Commodity Exchange, and the Intercontinental Exchange (formerly the International Petroleum Exchange).

Industrial metals include steel, tin, led, zinc, copper, aluminum and nickel. Precious metals, like gold, silver, palladium and platinum are not only used for jewelry, but also in the production of catalysts for cars and chips for computers. Geopolitical and economic factors in the leading producing and consuming countries affect price action, but each metal also has its own backgrounds of price changes. Metals are traded on different exchanges including COMEX Division of the New York Mercantile Exchange, the Chicago Board of Trade, the Tokyo Commodity Exchange, and the London Metal Exchange.

And two more areas of commodities are fibres and basic materials. Examples of fibres are cotton, wool and silk, whereas basic materials include paper, rubber, chemicals, lumber and plastics.

Some specific types of commodity traded are also everything related to the infrastructure (cargo can vary from container freight, to wet or dry freight) which ensures transportation of these resources. Besides, commodities, as a category to invest or trade in, also incorporate emissions. The Kyoto protocol is an international treaty on climate change which assigns mandatory emission limitations on greenhouse gas emissions to the signatory nations. Emissions trading focuses mainly on CO2 (carbon dioxide), but CH4 (methane), N2O (nitrous oxide), O3 (ozone) and SO2 are also very relevant.

So the variety of goods and factors that influence their price make the commodity markets very interesting and keeps curious about all their ins and outs.

Commodities also give the investor the ability to participate in virtually all sectors of the world economy and have the potential to produce returns that tend to be independent of the stock, bond and real estate markets. In fact portfolios that add commodity investments can actually lower the overall portfolio risk by diversification.