Commodities are everything that can be bought, sold or traded in certain markets.

Commodities are raw materials that are used to create products that are consumed in everyday life, all over the world, from food production to building homes or to running cars.

1. What are Commodities?
2. What affects the Commodity market?

3. How does the commodities market work?
4. Why trade Commodities with First Financial Banc?

1. What are Commodities?

We can consider two major types of commodities: soft commodities- agricultural products such as corn, wheat, coffee, cocoa, sugar, and soybean; livestock also. Hard commodities - natural resources that need to be mined or processed before using them, such as crude oil, silver, gold, rubber. Since old times, commodities have served a crucial role in shaping the global economy and have affected the lifestyle of people. History is replete with examples of how a shortage of critical commodities sparked huge public outcry and social unrest. Of late, the world community is concerned over the environmental and health costs of production and consumption of certain commodities and impact on society.




2. What affects the Commodity market?

► Income and population

When an economy is growing, industrialize and urbanize, people typically consume larger amounts of commodities - specifically industrial metals like steel, and energy as well. However, as economies become stronger, you will typically see smaller increases in commodity demand for a particular rise in income. But, the type of commodities consumed changes - as economies become stronger, people typically consume more protein-based foods, which in turn increases demand for livestock and the crops used to feed them.

► Costs and technology

A commodity price is fundamentally defined by the cost of producing this commodity. Commodity production costs include raw materials, research and development, insurance, licensing commissions, taxes and every other cost attached by real-world commodity businesses. When it comes to technology, it may cut the costs of production, since it might ask for fewer resources to produce it.

► Government policy and producer organizations

Some governments, specifically those from autocratic countries, raise commodity prices, especially energy and agriculture ones. They pretend to provide a benefit to their poor citizens. Another form is a tax. Governments tend to use taxations of energy, particularly transport fuel. They justify this tax for associated environmental costs.

► Weather

Too much of a weather type will damage a specific kind of agriculture. Hurricane-force winds in the US can obligate oil producers to shut down. The weather can affect other commodities too. Hurricane-force winds in the US Gulf can force offshore oil producers to shut down. Low water levels in fields can make it difficult for agriculture to grow up.

► Interest rates and the US dollar

If there are low-interest rates, usually businesses and consumers borrow money to invest and consume. This will result in an increase in demand for commodities. Most internationally traded commodities are bought and sold in US dollars. So, changes in US interest rates are transmitted through the price of these commodities.

3. How does the commodities market work?

When it comes to commodities market, it works just like the other markets. It is a physical or virtual space, where one can buy, sell or trade a certain commodity or a basket of commodities at current or future price. Trading commodities can be done through futures contracts also. A futures contract is an agreement between the buyer and the seller, wherein the buyer promises to pay the agreed-upon sum at the moment of the transaction when the seller delivers the commodity at a pre-decided date in the future.

Top five oil-generating countries

4. Why trade Commodities with First Financial Banc?

- 10 years of online trading expertise
- Small group of traders and dedicated account managers
- Trusted by +300,000 traders worldwide
- Multilingual Customer Support
- Market research with daily & weekly reports
- Global Liquidity & Instant Execution
- Segregated accounts with deposit protection