Types of Commodities

Broadly speaking commodities can be divided in two categories: Soft and Hard

Soft commodities are typically grown. Corn, wheat, soybean, Soybean oil, sugar are all examples of "soft" commodities. Many soft commodities are subject to spoilage, which can create huge volatility in the short term. Weather plays a huge role in the softs market, which makes predicting supply especially difficult.

On the other Hard" commodities are typically mined from the ground or taken from other natural resources: gold, oil, aluminum. In many cases, initial products are refined into further commodities, as oil is refined into gasoline. Because "hard" commodities are easier to handle than "softs," and because they are more integrated into the industrial process, most investors focus on these products

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