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# Commodities Trading

Commodities present good diversification for traders, since commodity prices are built around the moving and delivering of physical assets. Traders enter an exciting market with suppliers, merchants and large buyers which protect their prices on future deliveries, and lock in key strategic supplies. At maturity, each ‘financial trade’ gives rise to the delivery of a commodity cargo somewhere in the world.

Hence, traders need to be aware of Commodity fundamentals. These fundamentals will prevail over the longer term, because world growth remains the main driver of commodity prices: in short, people will continue to want, and need, energy and food.

#### Coffee

Coffee is one of the world's most important cash commodities as we all enjoy the aroma and taste of a good espresso.
The coffee tree grows in tropical regions between the Tropics of Cancer and Capricorn in areas with abundant rainfall, year-round warm temperatures averaging about 70 degrees Fahrenheit, and no frost.
Seasonal factors have a significant influence on the price of coffee. There is no extreme peak in world production at any one time of the year, although coffee consumption declines in the warm summer months.
However June, July and August usually show a spike in prices due to possible freeze scares during the winter months in the Southern Hemisphere where coffee is produced.

#### Sugar

Because of its widespread use, sugar is one of the most heavily traded commodities in the world.
Sugarcane is cultivated in tropical and subtropical regions around the world roughly between the Tropics of Cancer and Capricorn.
It grows best in hot, wet climates where there is heavy rainfall followed by a dry season.
Traders should keep in mind that sugar is also used for bio-fuels so as the use of biofuels increases, world sugar production will need to rise to satisfy strong demand.

#### Cocoa

Cocoa, or "food of the Gods" as the Spanish called it, is the common name for a powder derived from the fruit seeds of the cacao tree. The cacao tree requires a hot and rainy climate in order to thrive.
Production is usually confined to areas not more than 20 degrees north or south of the equator.
Four major West African cocoa producers, the Ivory Coast, Ghana, Nigeria and Cameroon, together account for about two-thirds of world cocoa production.
Geographic concentration and political instability of the major producers make it a very volatile market.

#### Cotton

Cotton was discovered more than 5000 years ago, and has been one of the more influential commodities given its widespread use in different products.
Cotton is a soft natural fiber that grows around the seeds of the cotton plant which requires a large amount of water.
Hence, price volatility can be very high.
Seasonal peaks tend to be between March and July.
China is by far the largest producer and consumer of cotton.
India takes second place, and the United States takes third place.

#### Orange Juice

Orange juice, or more precisely frozen orange juice, is a relative newcomer to the commodity markets because for the longest time, orange juice was consumed as fresh fruit juice because of its relatively short shelf life.
Only in the 1940s did the industry start to freeze concentrated OJ.
Brazil and the United States are the largest producers, but weather patterns can be particularly influential in both countries.

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