Commodity marketing is the buying, selling, and general trading of a commodity which is also referred to as products. Commodity here includes both raw materials and natural resources such as gold, oil, gas, coal coffee, and soft commodities like livestock and agricultural goods. You can also say that the commodity market is a place for investors where they trade in various commodities at their disposal.
Commodity marketing is a lucrative business for those who have monitored the terrain and are well informed of what it entails. Having stated that, here are some facts about commodity marketing that will be helpful to anyone interested in knowing how to start a commodity trading business.
- There are two main categories of commodity marketing:
Commodity marketing includes two categories which are soft and hard commodities. Soft commodities refer to those commodities that are either grown or ranched while hard commodities are those which are mined or drilled from the ground. Agricultural products, meat, and livestock are examples of soft commodities that can be traded while metals like copper, aluminium, gold, and silver; crude oil, natural gas, gasoline, ethanol, coal, and other energy products are examples of hard commodities.
- Commodity market can be physical or virtual:
With the advent of the use of offline and online markets, commodity market is not left behind in the sense that the marketplace could be both physical, where investors and traders meet in person, or virtual where marketing is done online. The world has become a global place that accommodates a lot more irrespective of distance or location.
- Commodity marketing can be done through future contracts:
A future contract is a legal agreement to buy or sell a particular commodity at a specific time in the future at an agreed price. Commodity marketing often happens through future contracts especially since it is mostly virtual. Now, this is usually done after consistent monitoring of the market, availability, demand, and pricing of commodities. Future contracts are also used to speculate price changes. When investors see that the price of a commodity will go up, they can buy for the future but if they sense that there will be a fall in price, they will sell in future.
- The stock market is different from the commodity market:
Although many seem to confuse the commodity market for the stock market, they are not the same. While the stock market is a place where shares of public listed companies are traded, the commodity market involves the buying and selling of commodities. Usually, the prices of commodities fluctuate as a result of changes in supply and demand. Sowing time and harvest time could also affect the price of commodities just like seasons and weather conditions but these do not have any effect on the stock market.