Commodities are the foundation of the global economy, under which most other goods are produced. These materials are divided into two macro-categories. “Hard” commodities are natural resources to be extracted or cultivated.
This group includes energy sources such as oil and natural gas, and metals such as gold and aluminum. “Soft” commodities, on the other hand, are agricultural products such as crops and livestock.
Commodity markets are well known to traders because prices can be highly volatile, often offering opportunities to make money by either buying (going long) or selling (going short). Factors that can affect prices include, for example, market or weather trends, infrastructure, legal regulations, economic performance, stockpile levels, and currency appreciations.
Table of Contents
The most commonly traded commodities
Below is a list of the most actively traded commodities, taken from data published by the Futures Industry Association (FIA).
- WTI Crude Oil
- Brent Crude Oil
- Natural gas
- Soy
- Corn
- Gold
- Copper
- Silver
West Texas Intermediate (WTI) Crude Oil
West Texas Intermediate (WTI), also known as Texas light sweet (ticker: CL), is a type of crude oil used as a benchmark for the price of oil. It is considered one of the 3 main commodity benchmarks referenced for oil trading; the other two are Crude Oil and Dubai Crude.
This benchmark, in particular, comes from the Permian Basin in the USA, and is primarily derived from Texas. Like many benchmarks, this one is basically for buyers and sellers of Crude Oil as its prices are generally referenced when buying or selling oil.
This type of oil is described as medium crude due to its relatively low density and sweetness due to its low sulfur content of approximately 0.34%. It is the underlying commodity of the New York Mercantile Exchange.
Brent Crude Oil
Brent Crude Oil (ticker: EB) is one of the top 3 oil benchmarks and is considered the type of ⅔ of the world’s oil contracts. As a result, Brent crude oil is considered the most used benchmark in the world.
It is extracted from the North Sea and is one of the major trading classifications of sweet light crude oil that serves as a benchmark price for oil purchases around the world. This type is described as light due to its relatively low density and sweet due to its low sulfur content.
Soy
Soybeans (ticker: ZS) are one of the most active and popular agricultural products. In fact, its global production has grown exponentially over the last 20 years and has more than doubled to $123 billion in market capitalization.
This may be partially due to its versatile and multipurpose nature as it can be used for the production of soybean oil, soybean meal and other uses. According to the United States Department of Agriculture (USDA), the United States is the leading producer and exporter of soybeans, exporting it mainly to China, the EU, Japan, Mexico and Taiwan.
Soybeans account for 90% of all oilseed production in the United States, which in turn accounted for 44% of global soybean exports in 2010 and 35% of global soybean production in 2010.
Natural Gases
Natural gas (ticker: NG) is a non-renewable hydrocarbon that like most fossil fuels comes from plants, animals and microorganisms that lived long ago. This fossil fuel is also used as an energy source for various purposes such as industrial, domestic and power generation uses.
Consequently, it is used for heating, cooking, and electricity generation. It is also used as vehicle fuel and chemical raw material in the production of plastics and other commercially important organic chemicals. Most of the world’s natural gas is produced in the USA followed by Russia, Iran, Qatar, China and Canada and is widely consumed in the USA, Russia and China.
Corn
An important food source, corn (ticker: ZC) is also used in the production of feed and ethanol. The main corn producers in the world are Argentina, Brazil, China and the United States. Since corn is an agricultural product, its supply can be negatively affected by bad weather.
Another factor that can influence the price of corn is the number of agricultural subsidies provided by government agencies. In the United States, corn production is heavily subsidized in order to provide a strong incentive for farmers to continue growing this crop.
But that’s not all, corn production can also be influenced by geopolitics. Since many countries such as China, Egypt, Iran and Israel import their corn produced from Ukraine, for example, the war between Russia and Ukraine that began in February 2022 has largely disrupted the supply chain of corn to these countries. As a result, prices of corn and other foods have skyrocketed.
Gold
Throughout history, gold (ticker: XAU) has been highly sought after for its beauty and as a valuable treasure. Gold is mainly mined in Russia, Australia, South Africa, the USA and Canada. It is also considered one of the oldest currencies in history. As a result, it is considered a safe haven asset.
While the traditional uses of gold have not changed, today it is also considered a key component in the production of electronics.
However, while gold prices are relatively stable, they are influenced by many factors such as inflation and deflation. The Fed’s monetary policy, supply and demand, and geopolitics can also impact the price of this precious metal.
Copper
Like gold, copper (ticker: HG) is widely used in the electronics industry due to the fact that it is a good conductor of electricity. Due to its wide use in the manufacturing industry, the price of copper can fluctuate based on economic production. The main producers of this metal are Chile, China and Peru.
Silver
Similar to gold, silver (ticker: XAG) is highly sought after as a precious metal. However, silver is also widely used in the production of solar panels and photographic films. Although silver is also considered a precious metal, most people prefer gold as it is a more reliable safe haven asset.
Read also: Lithium is the new gold: how global race to extract it faster can change geopolitical balances
