Investing in Commodity Markets

 

Commodity markets are the markets that deal directly with the production of goods. For instance, wheat is not produced by the wheat farmer, but traded instead on the commodity markets. A commodity market is simply a market which trades in the main economic sector instead of manufactured items, like sugar, cocoa and fruit. Hard commodities are generally mined, for example gold and oil. Futures deals are probably the oldest method of trading in commodities, dating back to the 19th century.

As food prices continue to rise, so too will the number of traders and investors who realize that the time to capitalize on this market has arrived. This has caused an explosive growth in the number of commodity markets, both online and off. One of the newer markets to surface recently is the New York commodities market, which is essentially an agreement among the producers of wheat, corn, canola, cotton, hops, rye and barley to agree to agreed upon futures prices.

In today’s turbulent economy, investors have become very interested in commodity markets which exist primarily off of agricultural products – food, fuel and metal ores. While there is little direct interaction between the producers and consumers (at most), the sheer volume of trading and movement of the markets is staggering. By watching a carefully crafted portfolio which closely monitors the movement of the various producers and commodities, you will be able to profit when the price of any particular item goes up, as you will buy it at a low enough price and sell it high when it reaches a high point.