Investing

The World’s Oddest Commodities

Crude oil, gold and silver top the list of the world’s most popular commodities, and as a result, prominent media outlets regularly update on the rise and fall of their values. But there are quite a few other commodities that are traded in the world’s markets, sometimes in aggressive fashion, all of which are subject to the speculative demand of the market. Often with less fluctuation, but sometimes with severe price spikes, the world’s lesser-known commodities are traded daily in the same fashion as their more flashy counterparts. Read on to learn how and why some of the more ‘popular’ (relative, of course), but seemingly unusual commodities are traded.

Soybean futures

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Photo (Quezi)

As the basis of both soybean oil and soybean food products, soybeans are one of the most competitively traded commodities of all. According to About.com’s Soybean Futures Profile, soybeans trade at a contract size of 5,000 bushels spanning the months of January, March, May, July, August, September, and November. While 5,000 bushels sounds like a lot (and it is), a single soybean futures contract can be purchased for $12.50, or 1/4 of a cent per bushel.

Trading and prices are most volatile during summer months, rising on sunny skies and falling – sometimes plummeting – due to floods or droughts. Monthly crop reports are another major mover of soybean future prices, and About.com warns that, “…emotions can control the markets” at all of times of the year. (The same is generally true of other commodity markets).

Rubber

Photo (TK Yeoh)

Rubber is used in all walks of life, and its versatility has made it a hot commodity on the world markets. Grown from trees like those shown above, rubber (also known as natural latex) is produced primarily in countries like India, Thailand, Indonesia, Malaysia, and China, according to CRNIndia.com. Companies and investors wishing to trade in rubber futures typically do so on the Tokyo Commodity Exchange, the Singapore Commodity Exchange, or Bangkok’s Agriculture Futures Exchange. The physical purchase and acquisition of rubber as a commodity, however, usually occurs in New York, Kula Lampur, and London, according to CommodityOnline.com.

Pork bellies

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Photo (Tokyo FoodCast)

One of the most volatile (and perhaps comical) commodities traded on the world market are pork bellies. As the name suggests, pork bellies literally come from the underside of hogs, which are cut into sections and flash frozen. Since pork serves as the basis for bacon products, pork belly futures are traded in a competitive world market and have been since 1961, when they debuted on the Chicago Mercantile Exchange. Trading pork bellies is not for the poor, or faint of heart however, as the smallest amount one can trade and take possession of at any given time is currently twenty tons.

Pork belly futures are known to rise or fall (sometimes suddenly and dramatically) in response to higher or lower demand for bacon. The volatile nature of pork belly futures are a common business joke. Regarding Robert Kiyosaki’s statement that his net worth is “$50-$100 million depending on the day”, Harvard MBA John T. Reed quipped, “what’s he invested in, pork belly futures?” Historically however, pork belly futures have risen in value the most during cold winter months when bacon is consumed most.

Palm oil

Photo (Nick Hobgood)

While not as newsworthy as crude oil (another commodity), palm oil is the world’s second most widely produced edible oil in the world. Over the years it has become an essential ingredient in such basic household products as margarine and soap, and has even been used as a biofuel in recent years. Recently, The Commonwealth Scientific and Industrial Research Organization found that using palm oil as a biofuel could reduce greenhouse gas emissions (though this claim has been somewhat controversial.)

All of these uses contribute to making palm oil – which BusinessStandard.com “expects to remain volatile this year” – a hotly traded commodity on the world markets.

Wool

Photo (Tambako)

Wool has been of immense value to society since the first farmer learned to shear a sheep’s coat. Used to make everything from clothing to blankets to noise absorbers, this valuable commodity is produced mainly in Australia and available for mass purchase on the Australian Wool Exchange in Sydney, Melbourne, Fremantle and Newcastle. Roughly 80 agents facilitate the trade of wool through the exchange, while those looking to purchase wool futures contracts must turn to the Tokyo Commodity Exchange.

Cocoa

Photo (Moonlight Bulb)

Vital to coffee brewers and chocolate makers, cocoa has a well-deserved reputation as what SeekingAlpha.com calls “a fickle plant.” As they elaborate in their article “Cocoa – The Last Commodity Standing”:

“Cocoa only grows within specific latitudes no greater than 10 degrees north and south of the equator; the top two cocoa countries are Ivory Coast and Ghana. Even in these perfect climates, however, cocoa is fickle: Extended dry spells can ruin the crop, and too much water breeds disease and lower yields. The worst culprit is something called black pod disease, which can lead to crop losses between 30 and 90%.”

Such unpredictable forces have the ability to send cocoa prices soaring, a major boon for those already possessing it via futures contracts. Starbucks and other coffee houses have been known to employ such contracts, which entail purchasing multiple metric tons, as hedges against cocoa price can cause occasional spikes.

Live cattle

Photo (John Morgan)

As the foundation of much of the world’s beef supply, live cattle find themselves traded daily and feverishly on the world markets. Live cattle (as opposed to feeder cattle, the other kind traded) is any cattle from calf to about 600-800 pounds. Raised mostly in California, Colorado, Kansas, Arizona, Nebraska and Texas, live cattle are then traded from 10:05AM-2:00PM in contract sizes of 40,000 pounds during February, April, June, August, October and December.

Major traders of this commodity include meat manufacturers, grocery chains, and certain restaurant chains, all of whom are affected significantly by rises or falls in the prices of beef.

Lean hogs

Photo (Dok)

Like live cattle, lean hogs are traded in contract sizes of 40,000 pounds and during the same months. Produced mostly in the Midwest (specifically Iowa, Minessota, North Carolina and Illinois), the average hog is raised for six months to roughly 250 pounds before being slaughtered and made available on the world markets according to TradeMeats.com, who also notes that the cost of hog feed greatly influences the supply of pork.

Traders are advised to follow the movements of day to day hog trading via the Hogs and Pigs Report, released quarterly, and the CMA Lean Hog Index, a two day average of prices. The United States is currently the world’s largest exporter of pork.

Sugar no. 11

Photo (Clif1066)

Sugar no. 11 is simply a distinction used by traders to denote raw cane sugar in its pure, unprocessed form (shown above.) Traded in contract sizes 0f fifty tons at roughly $11.20 per contract, Sucrose.com reports that sugarcane in this form is responsible for nearly 3/4 of all world sugar production, making it a commodity of tremendous importance to any business or industry dependent on sugar. In addition to the risk of poor harvests that confront all agricultural commodities, sugar trading has also become subject to political risks, like India’s recent banning of new futures contract trading.

Brazil is the world leader in sugar production at present, producing over fourteen million tons per year and exporting six million annually. Australia chips in with 5.5 million tons produced and 4.7 million exported.

For more on commodities, visit our commodities investing center.