Trading In Food Commodities
The food commodities are also one of the commonly traded commodities. The source is here. These include coffee, cocoa, sugar and orange juice. This is, however, a volatile market because there are many factors that could cause price fluctuations and create volatility. But it is this volatility that traders look for to profit from the market.
Coffee trees produce beans after three or five years and each tree generates coffee beans that can fill one regular coffee can in the growing season. So this makes growing coffee a very slow process and the producers of coffee are seriously affected by the fluctuations that happen in the seasonal temperatures which determine the output of coffee.
The years when the production levels are very low then there are gains in the prices. The years when the production levels increase then there is a decline in the prices of coffee.
Cocoa trees need at least five years in order to be able to produce edible cocoa and the peak production levels of these are at least 10 years after the trees are planted. This makes it very long for the production of cocoa and this is something that should be considered when assessing what the level of supply is.
The climate in the tropical regions are suited to make cocoa and the climate here is pretty stable but what affects the prices of cocoa is the political condition of these locations. Thus the internal affairs could cause the price of cocoa to fluctuate. Another factor that affects the price of cocoa is the block pod diseases. This is a fungus that destroys the crop. The political disruption and the fungal diseases could make the prices of coca shoot up.
Sugar has a tough competition with artificial sweeteners and this causes a lot of impact on its prices. But how will the trend continue is something that one is not clear about. The weather and the political situation of the countries where sugar is grown impacts the supply and the output of sugar. Weather conditions could impact the crop causing it to get destroyed. But the best part about sugar production is that it helps to generate high yields and thus there are very fewer disruptions in supply in this segment of the market.
The United States and Brazil have different climatic conditions but are two of the major orange juice producers in the world. The warm temperature of Brazil, however, wins over because of cheaper land. The major factors that cause the prices of orange juice to be volatile are when there are times when the climate freezes. The change in climate impacts the output. It is very important to know the weather to know how the change will affect the orange juice prices.