What Is An Agricultural Commodity?

Trading agricultural commodities is more than growing a crop and bringing it to the local market. Knowing commodity trading basics and having the technology to manage your business can be a game-changer. 

The following is a rundown of the basics of trading agricultural commodities. 

With knowledge of these fundamentals and the right tools, DTN strives to enable daily success for clients. DTN has created a product for the agricultural commodities trade: ProphetX by DTN. You can view up-to-the-minute changes in the market to show the actual value your crops hold.

 

Agricultural Commodity Trading Basics 

Agricultural Commodities are crops and livestock that are raised and harvested to provide food and sometimes fuel. Commodities are traded globally and classified into six categories. Many crops fall into these categories, so let’s review. 

 

Oil Seeds 

Oil seeds are grown for their high oil content. After the oil is extracted, the seeds are used for meals and feed. 

Crops included are: 

• Canola 
• Cotton 
• Palm oil 
• Soybeans

Cotton is essential because the fibers make both clothing and houseware products. Both commodities are used in a wide variety of industries and have a sliding value scale. 

Oil seeds, in general, have a strong relationship with the next category, cereal grains. This relationship is due to their versatility and high demand. 

 

Cereal Grains

Cereal grains are what feed humans and animals. They also create some fuel sources. Some crops included in this category are: 

• Wheat 
• Corn 
• Oats 
• Barley 
• Rough rice

Due to their versatility and demand on the market, cereal grains tend to keep a fair price. The value of cereal grains is determined by accessing the spread of the price between the grains. 

 

Meat: Food Source

Meat is a market that runs on livestock being raised and sold for their: 

• Meat
• Hide
• Organs
• Bones
• Hooves

Meat is classified into the appropriate category once butchered.  

 

Dairy

The agricultural industry bases dairy on market standards instituted by the Chicago Butter and Egg Board in 1898. Later in 1919, the organization reformed into the Chicago Mercantile Exchange. 

The products exchanged within this category are: 

• Milk 
• Butter
• Whey 
• Cheese 
• Eggs

The traders who formed the Chicago Butter and Egg Board had to keep prices fair and maintain public safety standards.

 

Soft Commodities 

Soft commodities are one of the more versatile classifications of Agricultural Commodities. Technically they are products that are grown rather than mined. 

Examples of soft commodities are: 

• Cocoa 
• Coffee 
• Frozen Concentrated Orange Juice (FCOJ)
• Sugar

These commodities are unique because farmers plant year after year, and the crop ends at harvest.

 

Miscellaneous Agricultural Commodities

The miscellaneous category contains the commodities that are grown and traded globally. They do not, however, fit into the previous classes. 

Such commodities are: 

• Lumber
• Wool 
• Rubber (from the rubber tree) 

The commodities create homes, tapestry, and more. Demand keeps items in this category relevant and vital. 

 

Working The Agricultural Commodity Market 

You can trade agricultural commodities either virtually or physically. Either way, trades can be made for finance or trade. Investors break down trading further by the time frame that the exchange takes place. 

Spot trade: A trade that will take place immediately or within a few days. The current market price determines the cost. 

Futures contract: A trade that is not an actual exchange of goods. A contract is an obligation for one party to make a trade or purchase at a future date for a set price.

An interesting occurrence of futures contracts is they are often offset by their obligation date due to market fluctuation. 

Hedging: Finances set aside to offset any loss due to trading (hedge funds). 

The modern farmer has to know how to grow their commodity and manage it into a growing profit. DTN has created a tool that will keep modern farmers in charge of their livelihoods. 

DTN’s products, monitoring, and educational tools put your entire operation in the palm of your hand. If you have an industrial farm, your office and the whole team will have the tools they need to enable great success. 

Trading on markets is exciting because the prices can go up and down based on a plethora of variables. With the DTN ProphetX portal, you will have an up-to-the-moment ticker. 

That rare feature allows you to know the actual value of your commodities based on real market pricing. With variables such as weather often thrown into the mix, software like ProphetX has proven its value to the modern investor. 

 

DTN ProphetX: Taking Commodity Trading Basics To The Next Level

Agricultural commodities are traded on several international markets. DTN ProphetX keeps track of these markets with a running ticker. It is just one feature to help keep you on top of the game. 

ProphetX provides news about the market and how it may affect your business and investments. We will also support your business in office functions such as risk management, accounting, and executive support. 

Another positive to ProphetX is that it is accessible across multiple devices. No matter your location, you can check the market and your business. 

We take all aspects of the industry into account, including the weather, which can potentially be a considerable threat. ProphetX can detect subtle changes in your commodities that can indicate disease. 

Customizable features and alerts for the ProphetX make it unique to your business and its needs. Agricultural commodities can be a temperamental industry, and ProphetX takes away uncertainty.

DTN takes the time to put into our clients and support the industries that run our economies. Through seminars, portals, and a free demo, DTN ProphetX works to empower clients through education to succeed.