Commodities are very crucial for every economy because it helps in the creation of other goods. Along with this, they are popular among traders as well. This is because their prices can be very volatile, thus allowing traders to profit by taking appropriate positions. There are more reasons to trade commodities, such as, it offers diversification options, works as a safe haven in time of global uncertainty, acts as a hedge against inflation, and allows traders to speculate on the commodity prices. If you are also planning to invest in commodities, then detailed below are the top ten most traded commodities.
Top ten most traded commodities
Following are the top ten most traded commodities in the world in terms of trading volume:
Brent Crude Oil
Crude oil is the world’s most in-demand commodity as it is used to refine several products, such as petrol, diesel and lubricants. Brent crude is one of the two major oil types used to benchmark global prices. The other one being West Texas Intermediate (WTI). Last year, there were 246,921,939 Futures and Options Contracts traded on the ICE, which is the biggest and most liquid exchange for trading Brent Crude.
West Texas Intermediate (WTI) Crude Oil
Also known as Texas light sweet, it is another grade of crude oil that plays a crucial role in benchmarking oil prices. It is a Medium crude oil because its density is relatively low, and the sweet in its name comes from its low sulfur content. NYMEX, which is owned by CME Group, is the most liquid exchange for trading WTI.
It is a popular commodity because it is extremely strong and relatively low cost. This makes it suitable for industrial uses, such as construction, infrastructure and manufacturing. Different varieties of steel are traded globally, including steel rebar, hot-rolled coil steel, scrap steel and more. Shanghai Futures Exchange and London Metal Exchange account for the bulk of steel trading. In 2019, about 458,999 Steel Futures and Options Contracts traded on LME.
It is a crucial base metal because it is a good conductor of heat and electricity, and is corrosion resistant and weatherproof as well. Copper is mainly used to manufacture roof tiles, pipes, industrial machinery, electrical wire, and alloys, including brass and bronze. LME and COMEX are the most liquid exchanges for trading copper. Chile, China, Peru and the U.S. hold the biggest reserves of copper.
These are the rocks and minerals from which iron is extracted. The bulk of iron ore is used to produce pig iron, which is then used for producing steel. Also, extracted iron is helpful to manufacture cast iron, magnets, as well as catalysts for many industrial and chemical uses. The SGX is the most liquid exchange for trading Iron Ore. Over 12,476,340 Iron Ore Futures Contracts traded on the Singapore Exchange last year.
It is the most precious metal that will always remain popular. Gold is seen as a "safe-haven" because it tends to hold its value (or even rise) during political and economic uncertainty. Gold is primarily used for jewelry and as an asset for investment. A small amount of this metal is also used for industrial production because it is a good conductor of electricity and is highly resistant to most chemicals. LME is the most liquid exchange for trading gold.
It is the second most precious metal, but unlike gold, 50% of silver’s demand is for industrial purposes. Silver is used for solar panels, photographic films and electrical contacts. A significant portion of silver’s total demand is for jewelry and investing purposes as well. It is also regarded as a “safe haven” but is less reliable than gold. LME is the most liquid exchange for trading silver.
It is estimated that more than 2.25 billion cups of coffee are consumed on a daily basis. Brazil, Vietnam, Colombia, Indonesia and Ethiopia are the biggest producers of coffee. The U.S. retail coffee industry is worth $18 billion a year. ICE is the most liquid exchange for trading coffee. In April 1977, coffee reached its all-time high of $339.86, while in October 2001, it hit a record low of 42.50 cents per pound.
Soybeans are popular because they are rich in protein and relatively cheap to produce. They are also used for producing numerous kinds of food and agricultural products, such as soybean oil, soybean meal, as well as meat and dairy substitutes, including tofu and soy milk. CBOT is the most liquid exchange for trading soybeans.
These are the dried and fermented seeds of the Theobroma cacao. The cocoa beans are used in the production of cocoa powder, cocoa butter and other chocolate products. Cote d’Ivoire, Ghana and Indonesia are the biggest producers of cocoa. About five million tons of cocoa beans are produced each year. ICE is the most liquid exchange for trading cocoa.