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|Instrument name||MT5/MT4 Symbol|
What are Agricultural Commodities?
Agricultural commodities are a vital part of our existence; probably even more than we realise. These commodities fall into the category of soft commodities, which include a variety of agricultural products, such as sugar, cocoa, wheat and coffee. In contrast, hard commodities are mined, and include, for example, crude oil, silver and gold.
Agricultural commodities can also be divided into 3 main categories:
- Food crops, such as corn and soybeans;
- Livestock, such as cattle and pork bellies;
- Industrial crops, such as wool and rubber.
These important commodities generally have three main purposes; they are either meant to be used, traded for goods or speculated upon. With such a huge demand for these products by people, nations, and companies globally.
Agricultural commodities trading offers a wide range of trading opportunities. At AvaTrade, we provide a secure and all-inclusive trading environment that enables you to trade your preferred agricultural commodity with access to a wide range of trading tools and features.
The Agricultural Commodities Market
The trade in agricultural commodities dates back thousands of years, making it the oldest financial market in the world. But with prices intimately tied into weather patterns, supply and demand, and a wealth of other factors, there are always new opportunities for traders. Over the last 63 years the average returns on the agricultural commodities market have been significantly higher than the global inflation rate. A consideration when deciding on what contracts to trade on.
Agricultural Commodities Trading with AvaTrade
Diversify your portfolio and discover the profit potential of the volatile agricultural commodities market with AvaTrade.
We offer a range of soft commodity futures to trade, including corn, soybeans, sugar, coffee and wheat – all with competitive spreads and generous leverage.
Understanding Agricultural Commodities
In order to take advantage of the many trading opportunities in the agricultural commodities markets, it is vital to understand the various factors that drive and impact these markets and the asset prices.
What Influences Agricultural Commodities Prices?
There are many factors that impact agricultural commodities prices. Some of these include the usual supply and demand, seasonal price cycles, weather events, such as droughts, floods, extreme cold, and other natural disasters. These events have a big impact on commodities, especially when it comes to crops, such as wheat, corn, and soybeans.
When it comes to livestock, there can be a wide range of issues that may arise, which can impact the prices of these commodities. If an epidemic arises, this will affect the supply of the livestock, while a lack of crops that feed the livestock, can also negatively impact agricultural commodities prices.
Beyond this, there are many tariffs which are attached to the import and export of commodities, while trade wars can also come into play. Many governments around the world apply tariffs to goods, including commodities, in order to protect their own producers. Agricultural goods are therefore traded with all of these macroeconomic issues in mind.
How Are Agricultural Products Traded?
While there are agricultural products traded in minor exchanges around the world, the largest by far is the Chicago Mercantile Exchange. This is where the largest grain futures and other agricultural commodities futures are featured.
Commodities are often bought and sold on the spot market, such as crude oil. A spot trade is the sale or purchase of a commodity for instant delivery. This is an opposite to futures contracts, where two parties agree to transact a commodity at a specific price and date in the future.
There are many reasons why one would use futures and options in the commodities markets. For example, a large buyer of corn, such as a company that produces breakfast cereal, may buy corn at a specific price for delivery in the future in order to lock-in the price. This is referred to as hedging.
Other market participants will use options as a way to protect themselves in the same way that a futures contract would. trading Options on agricultural commodities are often transacted directly between commercial market participants for risk management or hedging purposes.
There are also many speculators in the commodities market, and this is where the average retail trader comes into play. At AvaTrade, we offer commodities CFD trading, which means that you do not need to concern yourself with the purchase of the actual commodities.
Instead, you simply need to speculate on the direction that the price of the commodity will move. Commodity CFD trading with AvaTrade removes the complexities of trading the actual goods and it enables traders to benefit, irrespective of the direction that the market is moving.
Why Trade Agricultural Commodities
- Leveraged trading – traders can leverage their trades for a fraction of the actual value of the contract as contracts for difference are traded on margins
- Liquidity – Offering high liquidity, it’s just as easy to sell or buy futures as traders can easily liquidate their positions whenever required
- Total Transparency – The trading platform shows transparent actual market prices
- Broad Market Coverage – AvaTrade offers an array of agricultural commodities trading allowing you to apply your trading skills and insights to the most relevant asset and market
Agricultural Commodities Trading Exchanges
Agricultural commodities trading is classified as the world’s largest traded commodity class and traded on national and international commodity exchanges. All commodities, including soft commodities (coffee, sugar and cotton) are being traded on these exchanges:
Corn, Soybeans, Wheat – Chicago Board of Trade (CBOT)
Coffee, Cocoa, Sugar and Cotton – Intercontinental Exchange (ICE)
Check out the latest prices and relevant trading information for all of our agricultural commodities in our Financial Instruments Index. You can find out more about how AvaTrade calculates overnight interest and agricultural commodity CFD rollovers here.
Trading Hard Commodities with AvaTrade
Main Agriculture FAQ
How can I invest in agricultural commodities?
The traditional method for investing in the agricultural commodities is through futures contracts. There are both advantages and disadvantages to futures contracts. The advantages are that it is a pure play on the commodity, and the profit potential is huge. Plus it is easy to go either long or short. The disadvantage is that futures require a large amount of capital. An easier way to trade agricultural commodities is by using CFDs. This gives the same exposure, but for a smaller upfront investment.
What are the best agricultural commodities to trade?
The most popular commodities for traders are oil and gold, but there are plenty of opportunities in the agricultural commodities for a trader willing to put in the work to properly research the markets. Coffee futures are often good for a quick trade as this market tends to see rapid changes in sentiment and price. Corn and sugar are also good choices for trading in the agricultural commodities because they have good liquidity. Both also tend to trend strongly and a good trend can make a trader very happy.
Can I get rich trading agricultural commodities?
We’d all like to be rich some day. Of course that’s the very reason many people begin trading the agricultural commodities to begin with. And the good news is that it is possible to get rich by trading agricultural commodities. It’s also possible to become poorer. If you do your research and understand the markets you’re trading, plus avoid overtrading or “gambling”, you have a far better chance of success. And if you can become an expert in your chosen commodity market one day you might become rich as well.
Start trading commodities with AvaTrade and enjoy the benefits of trading with a regulated, award-winning broker!