Vital commodity assets for the market

by Alexander Zane Financial Analyst

The most important factor in the commodities market is, without question, the commodities. You can be as aware as you like about how markets work, how to read charts, etc., but if you’re not aware of what you are trading, it’s all for naught. The most important thing any commodity trader should be familiar with is the commodity assets. They should be aware of their value, their application, who trades in them, where they are sourced, and many other factors. This helps tell them to know when a particular commodity is of value, and when it will likely see deterioration in the market. So, a commodity trader should expand their horizons to focus on more than just their particular commodity. They should be flexible, as they may have to switch their strategy under certain scenarios. If they only remain aware of their one particular commodity, they could be left in the dust come crunch time.

This leads us to the subject of this article. Here, we would like to make the reader aware of some of the most important and vital commodities you have available for trading. These commodity assets come in three main categories: agriculture, metals, and energy.

Agricultural commodity assets

Agricultural commodity assets cover a wide range of materials. They are probably the most basic and prevalent type of commodity, as the most basic items that human beings need for survival. This first cover the most important perishables. This would be meat, dairy, grains; generally, all the staples of human diets. We can then also follow this with livestock, which itself provides a wide range of products (dairy, wool, meat, etc.). This is then followed by less immediately necessary items, like cocoa, sugar, oilseeds, and coffee. This would then by other miscellaneous items, like wool, rubber, and wood. These last items are, evidently, more like useful byproducts, as people do not directly consume them.

We should also keep in mind that many of these products need other agriculture products for maintenance. For example, livestock needs food, for which a farmer may buy grain, and plants may need fermentation. The most important of these products, having the deepest impact on economies, are grains like wheat and rice, then meat, and then others like sugar.

Since many of these products rely on the fertility of soils, the market varies heavily by climate, country, and time of year. Countries in the southern hemisphere will have more produce in corps while it is winter in the North, and vice versa. Thus, disasters, like droughts, can also have a sizable effect on the market as well. The market remains quite volatile due to the fact that all these factors can vary so highly.

These markets mainly rely on trades through future contracts, as farmers want to ensure that they sell their products.

Metal commodity assets

This industry relies on the extraction of certain vital minerals. They are in two separate camps.

Base metals

The first is the base metals. These are some of the most common metals on Earth, and they are cheaper, which is why manufacturers tend to use them. These are the sort of metals that have a real-world, practical use. This is usually for industrial purposes. Therefore, these types of metals tend to be somewhat malleable at high temperatures, but also strong when dormant.

They include several metals. The first of these are steel. Steel is incredibly common, and manufacturers use it as a base for all sorts of constructions. It is highly durable, and sturdy, making its attraction seem obvious. We can then mention aluminum. It is lightweight, but highly applicable, as it can endure a high amount of force. We can mention a few more, including copper (essential for electricity), tin, zinc, and lead.

Precious metals

Precious metals tend to be rarer, thus more expensive, and tend to be of less practical use. Their rarity makes them very precious in the eyes of the public, which means people tend to display them as a sign of opulence. Additionally, many of them have a direct visual appeal that favors having them on display. Many of them are used as jewelry and high numbers of other decorative uses.

This is not to say that they do not have practical purposes, just that people give them value beyond their practical use. Their rarity also means they would be less useful on large scales, e.g. as a car frame. Their specific use tends to vary from metal to metal.

Gold is one of those metals that are almost exclusively a source of wealth. It has direct visual appeal and is quite rare. Many people also keep gold as a safe-haven asset. Silver is close in value and many use it ostentatiously. It does have its uses, however, in producing items like mirrors, for photography, and batteries. Platinum can also often be in the form of jewelry but has practical applications as well. Most notably, it is an essential element in many catalytic converts (for mobile vehicles).

Energy commodity assets

Now we come to energy commodities. Nowadays, energy commodities are essential to keeping our modern world alive. Without electricity, and therefore the internet, or vehicles to drive, our economies would collapse completely.

Most of the most important energy commodities today remain non-renewable, so it seems likely that we shall see a depletion in their use as supplies drop. Nevertheless, they currently remain important so they are worth discussing.

The king of energy commodities is crude oil. In fact, it is the king of all commodity assets. Economies all around the world very often follow the performance of oil. Whole countries, like Venezuela, have completely collapsed due to a dip in the oil market. Crude oil can undergo refining to give several products. These can be as gasoline, providing energy for transport. Then we have heating oil, which is very useful for heating homes. Some oil products also create the plastics we find making up any number of objects. In short, crude oil has a wide range of uses and are essential for economies.

There are some other commodities we can discuss. Coal is essential for producing electricity for homes everywhere. We should note that electricity does not necessitate coal, and can be produced through any number of means. This is why many are looking into new methods of creating electricity, to provide us with energy for many applications. We also have natural gas. This is also useful for heating homes and produces less harmful byproducts than heating oil when in use.

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About Alexander Zane Innovator   Financial Analyst

17 connections, 2 recommendations, 65 honor points.
Joined APSense since, January 21st, 2020, From Sheffield, United Kingdom.

Created on May 29th 2020 07:05. Viewed 506 times.


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