What are the most traded commodities?
The commodities market is one of the longest standing financial markets, since they deal in the trade of naturally occurring goods, that can either be derived from the ground or are harvested. Because commodities are raw materials and are used to in the manufacturing process for food, energy and clothing, they are fundamental to many national economies.
The most actively traded commodity is oil, which can be bought and sold on the market through financial derivatives or exchanges on a trading platform. However, crude oil trading is just one type of commodity trade that you can take part in, and this article will tell you all about the most traded commodities on the market, to help you to decide which to add to your investment portfolio.
West Texas Intermediate Crude and Brent Crude Oil
As previously mentioned, oil is the most highly traded commodity in the world. Much of the reason for this is because it can be refined into essential products that we use every day, such as diesel, petrol and also the petrochemicals that are used in the manufacture of plastics.
West Texas Intermediate (WTI) and Brent Crude (EB) are the two major grades of oil that are used as benchmarks for the world’s oil prices. These two grades are particularly popular because of their low sulphur content, which makes them easy to refine into other products.
Iron is extracted from iron ores, which are minerals and rocks that are mined. Iron ores are predominantly used in the production of pig oil, which in turn, is heavily used in the production of steel. Of course, there are many different uses for iron ores, as it has both physical, chemical and industrial functions. It is also popular because is can be mined easily and is a plentiful commodity.
Many of the most popularly traded commodities are agricultural and one of the most actively traded of these is soybeans. In terms of leading producers, the US is the driving force behind soybean production and exportation, making up 90% of all oilseed production in the country. This commodity is most highly imported to China, the EU, Taiwan, Mexico and Japan, and is popular because of the fact that it is fairly cheap to produce and is high in protein, so used to make many different meat and dairy substitutes.
Gold is a precious metal that is mined and mainly used in the production of jewellery. The metal also has industrial functions, because of its ability to conduct electricity and resist many chemical reactions. Gold is considered as one of the worthiest assets to add to your trading portfolio because of its impressive hedging capabilities and its ability to outperform other assets during times of financial uncertainty or crisis.
Corn is regarded as a soft commodity because it is grown. Other soft commodities include cocoa, sugar and coffee, to name a few. Corn is a highly traded commodity because it is largely used in the production of animal feed, but can also be used to produce starch and ethanol, as well as having a range of other functions. The US is the main grower of the commodity and because of this, the price of corn can be directly impacted by the value of the US Dollar.
Of course, every commodity is different and depending on how it is sourced and used for production purposes, its price can be affected by a variety of different factors. For example, the likes of corn and soybeans may be directly impacted by poor weather, since they are agricultural commodities. Whereas the price of oil, on the other hand, might be affected by seasonal reduction in air travel. Whichever commodity you choose to add to your portfolio, ensure that you conduct sufficient research and employ a trading strategy to reduce the risk of losing capital.