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The Basics of Trading Agricultural Commodities

There are a lot of individuals who have made some serious money trading agricultural commodities. While there is no question that this type of trading has a lot of appeal, it is important to fully understand some of the basics of this type of trading. For starters, agricultural commodities are known as various staple crops and livestock produced on farms. These are in addition to dairy and grains. Moreover, sometimes latex and rubber harvested from trees have been identified as agricultural commodities in an industrial sense. Additionally, some commodities have become distinguished as both industrial commodities and as a source of food. Corn is one example of this. So, how do you get started in trading these assets? Here are some basics to consider:

Agricultural commodities fall into six basic categories.

If you are going to engage in agricultural trading, you need to understand there are six different types of agriculture commodities. These would include Oil Seeds, Cereal Grains, Meat, Diary, Other and Miscellaneous. These all are well-known as either a source of food for humans, a food source for livestock and as a way to make fuel.

All of these agricultural commodities have different characteristics.

Not all agricultural commodities are created equal. For example, agricultural trading of Oilseed commodities can be difficult to classify because they serve more than one different purpose. Additionally, cotton is an important commodity simply because they are highly utilized in the clothing industry. Moreover, dairy commodities are perhaps the oldest publicly trading agricultural asset, having been first started on the Chicago Butter and Egg Board.

Some commodities have a global market but don’t really fit in with any cut-and-dried area.

Items such as lumber, rubber and wool have a well-developed global markets but they really don’t fit in with other agricultural materials.

Naturally, agricultural trading can be a complicated endeavor, so it is important to do thorough research before engaging in the trade of these commodities. In this case, knowledge is definitely power. Study as much as possible and you are sure to be successful in this investment strategy.