Trading Commodities – What Are Hard And Soft Commodities

 

The commoditie trading market separates the commodities into two broad categories. Check the BTC Profit review.  The two distinction’s that are made are hard and soft commodities.

Hard commodities

The hard commodities are those that attract the most news. These are those that get extracted from the natural resources or are mined from the ground. The popular among the hard commodities are gold, aluminum, silver etc.

Oil is also a part of this category of commodities but there is confusion because oil as such is not hard in nature. However, since it is also extracted from the ground and is obtained from natural resources it forms a part of hard commodities.

Another characteristic of a hard commodity is that these are refined and formed into new products. The same applies to oil because oil is refined to gasoline and this is used for consumption of energy.

Hard commodities are those that are easy to handle and these are also much easier to transport. These are also used in industrial uses and the investors in commodities pay close attention to the industrial uses of commodities.

The hard commodities form a major part of the commodities market and they also dominate this market. The majority of traders restrict their trading to hard commodities only.

Soft commodities

Soft commodities are not as popularly traded as the hard commodities but these still have a major role to play and make a part of the trading volume in the commodities market. The soft commodities are those that are obtained from farming and some of the well-known soft commodities are coffee, corn, cocoa, sugar etc. The soft commodities are prone to getting spoilt and this could impact their prices drastically

The soft commodities face the problems of transportation and growing and this impacts its supply levels. This causes short-term volatility in this market segment. The prices of soft commodities could change without any anticipation.

The volatility in the soft commodities market could be positive or negative. Reduction in supply is beneficial for those who are in a long position but is negative for those in a short position. It is very important that one time the market as well as structures it well to trade in soft commodities.

The food producers take up the bulk positions in this market to hedge their positions. The position helps them to lock in a future price and they also make use of the natural seasonal trends.