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COMMODITIES

What are Commodities

The trading of commodities futures contracts has been around for a long time, traded on exchanges such as the CBOT and ICE, the largest exchanges for trading commodities in the world. The soft commodities market is an interesting one and you can trade many well-know products such as coffee, soy beans etc. There is a good opportunity to make profit from these often volatile products. Trading through exchanges is different to trading the physical product. On these futures exchanges you would not be trading the physical product for instant delivery. Instead, you would be trading the future price of the product for delivery at a future time and date.

Commodities

	What is Commodities trading
	Why should I trade Commodities

On PIPTRADE you can take positions, long or short on the prices of futures contracts for the following products: Sugar, Soybeans, Coffee, Cotton and Cocoa.

History of Commodities

Before the North American futures market originated some 150 years ago, farmers would grow their crops and then bring them to market in the hope of selling their commodity or inventory. But without any indication of demand, supply often exceeded what was needed, and un-purchased crops were left to rot in the streets. Conversely, when a given commodity such as Soybeans was out of season, the goods made from it became very expensive because the crop was no longer available, lack of supply.

In the mid-19th century, grain markets were established and a central market place was created for farmers to bring their commodities and sell them either for immediate delivery (spot trading) or for future delivery (futures). The latter contracts, forwards contracts, were the forerunners to today’s futures contracts. In fact, this concept saved many farmers from the loss of crops and helped stabilize supply and prices in the off-season.

Popularity arose in this style of market trading and the next major step taken was to standardise the terms of each contract as well as the market practices. As trading in forwards or futures contracts increased and became a popular method of investment the entry of other commodities was encouraged.

As the market place grew a body of people set up a platform to regulate and supervise the transferring of contracts between buyers and sellers. This eventually led to the creation of the Chicago Board of Trade (CBOT) in 1848.

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