There are a few reasons that commodities are separated into different types. First of all these exist to make it easier to compare prices. These differences are also there for the convenience of trading as well to make them easier to research. Yet for almost every single one of the types of commodities out there, you will want to know some basics to get started. When it comes to which one is best for you, there are a few different options to consider.
Energies: The first in our list has been very active in recent times. This one features many different products that provide energy to heat and power homes as well as businesses. This includes petroleum, byproducts of petroleum, crude oil, heating oil, propane, natural gas and even coal. In this section of kinds of commodities there is a minimum price that is set by the exchange. There is also a standard contract size, which is the amount covered by the futures contract.
Grains: The next one on the list of commodity types are grains. This includes wheat, oat, corn, rice and soybean. It can also include a lot of other various agricultural products. The Chicago Board of Trade or CBOT is involved with these types quite a bit. These are usually sold as future trades. These types of commodities have a minimum as well, and also a standard contract size.
Softs: Softs include coffee, cocoa, sugar, cotton and orange juice. The most common exchange for these commodities is the Coffee, Sugar and Cocoa Exchange or CSCE. The reason that the oranges themselves are not traded as types is because eighty percent of them are turned into frozen concentrate, so this is what is traded instead. The New York Cotton Exchanges even has the name Frozen Concentrated Orange Juice or FCOJ as one of the things they trade.
Meat: Meat is another type of popular commodity. This includes live cattle, pork bellies and lean hogs. This is primarily exchanged on the Kansas City Board of Trade or KCBT. This is actually where historically, livestock have been traded. The commodity seems to be less volatile than others. A lot of times this particular commodity type is dependent upon grain as well, since the grain feeds most of the livestock.
Financials: The last one of the commodity types we will look at, are known as financials. This type is mentioned here because most trade in futures or options, instead of the actual goods. This means financial commodities are often listed on the same exchanges. This includes United States Treasury Bonds and can be found on the CBOT as well as the S&P 500 Indexes. This exchange also trades stocks as a financial commodity.
As you can see there are a few different types of commodities that are out there. There are different exchanges where these various commodities are traded. Now that you know the basics, you should feel a bit more comfortable when it comes to navigating this maze of various commodity types.