With daily necessities items such as eggs, flour, rice and sugar getting more expensive, it is a good time to learn how to protect your wealth from inflation by learning about commodity futures contract.
What Is A Commodity Futures Contract?
There are 2 types of commodity, soft or hard.
Soft commodities include corn, soybeans, wheat, oats, rough rice, live cattle, lean hog, feeder cattle, lumber, coffee, cocoa, sugar, orange juice, crude palm oil and rubber.
Hard commodities include gold, silver, platinum, palladium, aluiminum, crude oil, natural gas, gasoline.
The differentiation is that soft commodities are grown while hard commodities are mined.
Where Are Commodity Futures Contracts Traded?
Corn, soybeans, wheat, oats and rough rice are traded in the CBOT exchange (Chicago Board of Trade).
Live cattle, lean hog and lumber are traded in the CME exchange (Chicago Mercantile Exchange)
Coffee, cocoa, sugar and orange juice are traded in the ICE exchange (ICE Futures U.S.).
Crude Oil, natural gas and gasoline are traded in the NYMEX exchange (New York Mercantile Exchange).
Gold, silver and copper are traded in the COMEX exchange (Commodity Exchange Incorporated).
Palladium and platinum are traded in the NYMEX exchange (New York Mercantile Exchange).
It is important to know where the commodities are traded, as we can then refer to the relevant section of the commitment of traders report. The commitment of traders report is published every week and it shows whether the large speculators are buying or selling the related commodity. As going through the various commitment of traders report is tedious, you can use this time-saving COT Report Futures Heatmap.
Crude palm oil is traded in the KLCE exchange in Asia only and not listed in the commitment of traders report.
Rubber is traded in the SICOM exchange in Asia only and not listed in the commitment of traders report.
Seasonal Trends of Commodities
Unlike stocks, commodities are not only driven by market forces, but also by the seasonal demands. For example, in the winter months, there would be a higher demand for heating oil in the colder countries. In India, there is a stronger demand for gold during the festival months. All these will drive up the heating oil and gold commodity futures prices.
As you can see, trading in commodity futures contract can be very profitable if you understand the natural tendency of the seasonal demand and supply.