Lean Hogs Trading Defined and Explained

Lean hog futures trade at CME Group in the livestock futures complex, which also includes live cattle, feeder cattle and pork belly futures. The standard trading unit for lean hog futures is 40,000 pounds. One trading point equals $0.01 per hundred pounds or $4.00 per point. Minimum price fluctuations are in multiples of $0.00025 per pound, or $10.00 per tick. Contract months are February, April, June, July, August, October and December.

Lean hog futures contracts are cash-settled to the CME Lean Hog Index, a two-day weighted average of United States Department of Agriculture (USDA) cash prices for producer-sold swine or pork market formula transactions.Lean Hogs Prices/Rates

Lean hog futures trade at CME Group in the livestock futures complex, which also includes live cattle, feeder cattle and pork belly futures.

The standard trading unit for lean hog futures is 40,000 pounds.

One lean hog trading point equals $0.01 per hundred pounds or $4.00 per point.

Minimum price fluctuations are in multiples of $0.00025 per pound, or $10.00 per tick.

Contract months are February, April, June, July, August, October and December.

Lean hog futures contracts are cash-settled to the CME Lean Hog Index, a two-day weighted average of United States Department of Agriculture (USDA) cash prices for producer-sold swine or pork market formula transactions.Lean Hog Trading Fundamentals

Most U.S. hog production occurs in the Midwest near the source of hogs main feed supplies, corn and soybean. The largest hog producing states are Iowa, North Carolina, Minnesota and Illinois.

Normally, it takes about six months from the time of birth for a pig to reach slaughter weight of 230-260 pounds. At 250 pounds live weight, a hog will yield 88-90 pounds of lean pork consisting of about 20-21 percent each for ham and pork loin, 14 percent for the pork belly or bacon cut, 3 percent spare ribs, 7 percent Boston butt roast and blade steaks and 10 percent picnic. The jowl, fat and other trimmings are used in a variety of meat products and the hide for leather. Everything on the hog is used except for the squeal, according to one expression.

Lean Hog Trading Fundamentals

Hog prices seasonally tend to be highest between May and July when the number of market hogs is usually the lowest and meat distributors are starting to accumulate supply for the bacon-lettuce-tomato sandwich season and for freezer storage for the winter.

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Lean hog futures traders need to watch the price of corn because that is the main ingredient in hog feed rations. If the price of corn rises substantially, hog producers will be more inclined to take their hogs to market at lower weights to reduce high feed costs. That typically causes lean hog futures prices to decline initially as more supply becomes available, but it eventually should result in a smaller hog herd, lower pork supply and higher prices.The relationship of lean hog and corn prices is so intertwined that a lean hog futures trader can monitor the hog-corn ratio to get a simple but sound indication of developments in hog production. This ratio just divides the price of lean hog futures by the price of corn futures. In the past, the dividing line for the hog-corn ratio was about 14 a ratio larger than 14 would encourage hog producers to increase hog numbers and a ratio less than 14 would be likely to cause hog producers to decrease hog numbers. That dividing line in recent years has gotten closer to 18-20, as more than 40 percent of total U.S. hog production is now on a contract basis where the producer now just provides the labor for a large commercial hog operation that doesnt have the same flexibility to adjust numbers as the individual hog producers of the past did.

Lean Hog Trading Information

The major report for the lean hog futures trader is the Hogs and Pigs report released by USDA near the end of each quarter. The report includes data on the size of the total U.S. hog herd, the size of the pig crop, a breakdown of market hog numbers into several weight categories, the size of the breeding herd, the number of sows farrowed in the previous months, pigs per litter and hog producers farrowing intentions for the coming months.

The lean hog futures trader should also be closely monitoring the CME Lean Hog Index, a two-day weighted average of cash prices. Beginning in 2003, the cash prices used in the index became the average net prices at the average percent lean for slaughtered hogs. USDA releases these price reports and other data daily.

USDA provides a number of other reports of interest to lean hog futures traders including daily slaughter totals and the monthly Livestock Slaughter report, which presents statistics on total hog slaughter by head, average live and dressed weight in commercial plants by state and in the United States and other slaughter data.Several reports published by USDAs Economic Research Service, including Livestock, Dairy and Poultry Situation and Outlook and Red Meat Yearbook, give data on imports

and exports of lean hogs, offering monthly, quarterly, and yearly statistics that are separated out by selected countries by carcass weight and live animal elements.

Extension services in a number of hog-producing states also provide a large amount of material on all phases of hog production and on the economics of the hog industry.Lean Hog Trading Strategy

All of the numbers contained in the Hogs and Pigs report make if possible for the lean hog futures trader to calculate the amount of pork supplies in the future by analyzing the breakdown of market hogs by weight and add estimates of how long it will take these market hogs to reach the weight at which they will be sent to the packing plant. Deviations from the percentage change in hog numbers and the percentage change in slaughter figures from the previous year may indicate that there was some error in the estimates or that the numbers of hogs are being increased or decreased for economic reasons.

The number of newborn pigs should also help the lean hog futures trader gauge the amount of hog slaughter and pork supplies about six months later. Once pigs are born, they will go through the biological cycle of weaning, feeder pig and market hog stages and will be sold at some price. They are not a storable commodity other than the relatively short period they may have in freezer stocks after slaughter. Knowing the amount of supply that must move through the food pipeline at some price can help the lean hog futures trader plan a trading strategy.

Investing in Lean Hogs

Hog producers often use marketing contracts to sell their lean hogs directly to packers. Types of marketing contracts include fixed price, fixed basis, formula price, cost plus, price window, and price floor. It is important to mention that when hogs are priced, it is usually with regard to the actual percent lean of their carcasses, because it is this percentage that determines the actual amount of meat the carcass will yield. When live hogs are sold at an auction, however, the price is based on an expected percent lean.

Instead of becoming involved directly in the hog business by trading lean hog futures, an investor could purchase shares of companies that are heaving involved in commercial hog operations such as Smithfield Foods or Tyson. Knowing about lean hog production and marketing would be helpful in evaluating the prospects for such companies.

Lean Hogs Trading Background

The lean hog industry has seen dramatic changes during the last decade due to a move to contract and vertically coordinated production. This move was partially spurred by an effort to maintain control of the growth process and to improve production, efficiency and lean hog profitability.

Another development in recent years has been the increase in pork exports. The United States is the worlds largest pork supplier, and the export market could become a more significant price influence if countries like China increase pork imports. China is a large hog producer itself but is also a major consumer of pork, and the size of its population and improving diets could mean a big boost in pork demand.

Lean Hogs Trading History

Trading in live hog futures began at CME in 1966. At that time the contract called for 20,000 pounds of hogs delivered to terminal facilities. Options on live hog futures were introduced in 1985. Over the years the contract has evolved to better serve market users, increasing the size of the contract to 40,000 pounds in 1991 to match the size of the live cattle futures contract. The name of the contract was changed to lean hog futures in 1997, when lean hog futures contracts became cash-settled to the CME Lean Hog Index. Since 2002, lean hog futures contracts have been traded in both the traditional open-outcry setting and electronically.

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Live Cattle Trading

Live Cattle Trading Defined and Explained

The live cattle futures contract reflects current supply and demand for feed cattle, prices of competing meats and the cost of feed grains, along with long-term cyclical patterns for meat supply and consumer preferences. The live cattle futures contract revolves around a non-storable commodity live cattle. The live cattle contract has proven to be an important tool for both cattle producers and packers to effectively manage price risk. The seasonal aspects of meat production, cyclical aspects of the cattle industry and consumer's desire for meat products make the contract an attractive contract to trade. Live Cattle Market Investing

Those interested in investing in live cattle should first spend a significant amount of effort gathering information. A large percentage of live cattle futures traders are involved with the beef industry and trade futures as a way to stabilize price fluctuations. The beef business is quite involved and has evolved as technology increasingly enters the cattle market. New investors should not expect to find one book to answer all their questions about beef production and the idiosyncrasies of trading. In the case of live cattle futures, traders should also be aware of the intricacies of physical delivery of cattle and the various premium or discount levels involved in delivery if they intend to trade the live cattle spot month contracts.

Live Cattle Trading Prices & Rates

Live cattle futures are traded at CME Group.

The standard trading unit for live cattle is 40,000 pounds of particular grades of cattle physically delivered to designated delivery points in the United States.

One trading point equals $0.0001 per hundred pounds, amounting to $4.00 per point, but live cattle futures trade with a minimum price fluctuation of $0.00025, which equals $10 cwt.

Contract months are February, April, June, August, October and December.

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Live Cattle Trading Supply Information

Live cattle futures pick up where feeder cattle leave off. Feeder cattle are typically those younger cattle that graze pastures or wheat or are fed hay until they weigh about 600 to 800 pounds. Then they are placed in feedlots, where they receive higher concentrations of feed rations that may include corn silage; a feed grain such as corn, milo or wheat, depending on feed grain prices; soybean meal for protein, and alfalfa, clover or some other type of hay. The live cattle eligible for delivery on the live cattle futures contract remain in the feedlot for 5-6 months and gain another 500 pounds, becoming the live cattle traded. Live cattle are usually slaughtered at 1,200-1,300 pounds, producing a dressed carcass of about 750-800 pounds. The seven major live cattle producing states are Arizona, California, Colorado, Iowa, Kansas, Nebraska, and Texas, which provide most of the statistics of interest to the live cattle futures trader.

Live Cattle Trading Trading Tips

Reports of mad cow disease or a meat recall due to an e-coli or salmonella threat can disrupt live cattle prices, frequently involving a sharp panic sell-off initially and then a recovery as the extent of the problem usually is not as great as feared at first. There can be longer-term consequences for live cattle prices if an episode is severe enough to affect consumer opinion about meat choices or if consumers decide to change their eating habits due to some diet fad.Live cattle have also been the focal point of some trade negotiations, particularly with Japan and South Korea. Although most live cattle trading issues are domestic, beef exports have grown enough to affect live cattle prices and get traders attention, and word that a beef shipment has been rejected for some reason or that a nation has agreed to resume beef imports can have price repercussions.

Live Cattle Trading Factors

Weather can be a very important factor in determining live cattle prices, either on a short-term basis or long-term basis. If the weather is very hot when live cattle are in the feedlot, weight gains are using less than normal because the cattle tend to eat less. If a period of hot, dry weather is prolonged and grazing range feed supplies are reduced, cattle may be pushed into feedlots early. Conversely, if grass conditions are very favorable, cattle movement into feedlots may be delayed. In either case, weather may cause some shifts in the flow of live cattle available for slaughter. Extremely cold weather in major cattle feeding areas may also mean live cattle have to expend more energy to keep warm, reducing weight gains. Unusually muddy feedlots due to heavy snow/rain may also have the same effect on weight gains. Winter blizzards can also make shipments from feedlot to slaughterhouse difficult, causing temporary disruptions in live cattle supplies that may be significant enough to cause short-term fluctuations in live cattle futures prices as live cattle numbers bunch up.

Live Cattle Trading Information

The monthly cattle on feed report from the U.S. Department of Agriculture is the most important report for the live cattle futures trader. The cattle on feed report includes the total number of cattle and calves on feed at the beginning and end of each month, the number of feeder cattle placed into feedlots during the month to produce a carcass that will grade select or better and the number of live cattle marketed or shipped to slaughterhouses from feedlots during the month. During January and July the report is based on a survey of all known U.S. feedlots with a capacity of 1,000 head or more. In the other months the survey covers these feedlots in 17 major states, which account for 98 percent of the cattle on feed.Another important USDA report for live cattle futures traders is the cattle inventory report as of January 1 and July 1 each year. This report is like a census of cattle of all kinds, including beef cows, dairy cows, calves, etc. as well as live cattle on feed. The total U.S. cattle herd has been 95-100 million head in recent years with about 10-12 million cattle on feed, depending on the time of year. Live cattle auction reports, especially from key areas like Nebraska or Texas, also influence live cattle futures prices. Weekly cattle slaughter figures and monthly cold storage stocks revealing meat supplies in freezers are other reports of importance to live cattle futures traders.

Live Cattle Trading Strategy

Live cattle futures prices tend to move in cyclical patterns, both seasonally and over a long-term basis related to the live cattle biological cycle. Seasonally, live cattle prices tend to move higher from November to January and lower from February to May in line with shifts in beef supplies and consumer demand. Market signals driven by the longer-term cattle cycle provide beef cow producers an opportunity to invest more profitably in beef cow herds. Economic returns to the live cattle operator are variable and generally cyclic in nature. The live cattle industry has historically followed a ten-year pattern of expansion and contraction in cattle numbers with per head prices paid on cattle reacting in a typical supply and demand response. As live cattle profits build in reaction to a profitable period, the price per head declines in response to increased supplies. When

profits to the industry become negative, the live cattle industry reduces supplies of cattle to the point where supply and demand provide a more positive return to the live cattle operator. Sometimes the shifts in prices are more beneficial for the feeder cattle provider and sometimes for the feedlot operator and sometimes neither. By the nature of the enterprise, the live cattle sector requires significant intermediate- to long-term capital investment.

Live Cattle Trading Trading History

The live cattle trading cycle can be traced back to the Civil War with a good deal of predictability. Each 10 to 12 years, typically near the middle of a decade, beef production peaks and prices decrease as supplies increase. The lower prices result in losses to cattle producers who, in turn, reduce production. This eventually causes the live cattle cycle to complete by causing higher prices and profits typically at the end of the decade, thus encouraging more beef production and continuation of the cycle. In 1964 The Chicago Mercantile Exchange introducing the first futures contract on a non-storable commodity live cattle. Since then, the CME live cattle futures have been an important tool for both cattle producers and packers to effectively manage price risk.

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Meats Trading

Meats Trader... Investing In Meats...

Meats futures are financial instruments that are used to hedge price risk or to speculate on price fluctuations in livestock and meat markets. Trading meat futures contracts appeals to livestock producers because they face a variety of risk from uncertain weather, feed costs, the availability of feed and grass, rates of gain, conception rates, animal health, shipment costs and reactions to disease scares and diet fads that can turn demand around almost overnight.

Trading commodity meat products helps livestock producers, processors and agribusinesses involved in the food chain manage the constant price risks they face, enabling them to lock in profits, perform better business planning and serve their markets more effectively with more consistent pricing. Livestock futures give producers a way to support and strengthen their operations to provide products to consumers at better prices. Meats Trading Prices & Rates

The first important point to make about meats markets is that livestock futures prices and the cash prices for the related livestock products are not usually the same because there may be large differences in specifications between the meats exchange market and the cash market with which consumers may be familiar.

Meat futures are based on a specific type and grade and quantity of animals whereas prices in the cash meat market are based on cutout values that may cover a wide range of types and quality of the meat available at the butcher shop or meat counter.

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Meats Trading Tip

When prices of key feed ingredients like corn and soybeans go up dramatically, as they did in 2008, you might expect those higher prices would drive up prices of meat futures and meats at the grocery store. That is quite possible in the long run, but the short-term price reaction is likely to be just the opposite, resulting in lower prices.

Meats are not storable for a long period of time so, essentially, what is produced must be consumed at some price. If the animal numbers are large, the feed demand for corn and soybean meal increases and prices of corn and soybean meal tend to go up. The use of corn and soybeans as a fuel exacerbates the demand for these commodities as their prices reflect what is happening in the energy market. As feed prices rise, livestock producers find their input costs become too high and they begin to cut back the size of their herds. As they push more animals to market, the meat supply increases, putting pressure on meat prices.

Eventually, the animal numbers will get low enough that demand for meat begins to pull meat prices back up and encourages livestock producers to increase animal numbers again. As they withhold animals from the market to build up their herds, supply diminishes further and prices move even higher. It takes time for this cycle to develop. While hog numbers can grow rather quickly, it may take 3-5 years to rebuild the cattle herd because of longer gestation and feeding periods. Meanwhile, cattle prices may get strong until herd numbers increase as the cycle repeats itself.

Meats Trading Information

Meats trading takes place at the CME Group, where futures and options are traded on live cattle, feeder cattle, lean hogs and pork bellies. A CME livestock futures contract is simply a standardized agreement to buy or sell livestock at some date in the future. The CME contracts specify the quantity of the meat (pounds of livestock as well as the range or weight for individual animals); the specific U.S. grades of meat if they apply; and delivery points (the physical location to deliver the commodity, such as live cattle, or cash settlement in the case of feeder cattle and lean hogs).

Livestock futures prices are listed in daily newspapers and other media, typically in the same section as stocks, grain prices and other markets. Commentary in most newspapers about meats trading is usually limited to major livestock indicators. The meat markets tend to get publicity only when something unusual happens such as an outbreak of a disease or a change in dietary habits.

The U.S. Department of Agriculture collects and maintains a large amount of meats market data and supplies most of the information about slaughter numbers, meat stocks, cash prices, etc. with a variety of daily, weekly and monthly reports.

State Cattlemans Associations typically have good information about the livestock market and give details on auctions and livestock trends that may be occurring. Reports associated with grain and soybean supplies can be important because of their implication for feed costs, and any reports that deal with the U.S. economy may provide significant insights into the consumers ability or willingness to purchase meats.

Meats Trading Rationale

When cattle ranchers are concerned that prices will be lower when their animals will be ready to market, they can use the meat futures markets to hedge their production to protect themselves financially. Ranchers can calculate the cash price they will need to receive for their livestock and can sell live cattle futures as a way to lock in a price to ensure profitability or minimize losses despite declines in the cash market price for livestock.

If the cash meat market prices do decline, ranchers will likely lose money when they sell their physical livestock, but they will have gained money in the futures trade. The profit on the futures transactions helps to compensate for the loss in the cash market sale. Hog producers can also hedge their production in a similar manner. Likewise, buyers of livestock or large buyers or distributors of meats or meat products could protect themselves against a rise in prices by using livestock futures to hedge their requirements.

Meats Trading Software

Having the right tool for the job is critical. Ask any trader what trading tools or types of financial analysis he is using and you're probably going to hear sochastics, Fibonacci, Elliotwave, MacD, moving averages, etc.Trading software can be used to augment your existing approach by giving you a broadened perspective.

The key to a meats trading system is its ability to forecast moving averages! One of the better software products is VantagePoint trading software that helps you to see what is likely to happen in the market that you are trading before other traders (using only single-market analysis) catch wind of it. Frequently the crossover indicator flashes an early warning that the meats market is likely to make a top or bottom - before it actually happens!

Meats Trading Indicators and Indices

Most livestock trading contracts are monthly contracts with beginning and ending dates that that are spelled out in advance. Most Livestock and Meats contracts are produced daily, weekly, monthly, quarterly, and yearly so this is a well-tracked market.

National Agricultural Statistical Service reports are a major basis for most indicators in the meat and livestock sector. Here are some of the major livestock and meat reports that can help a meat futures trader analyze markets:

Cattle Inventory (Semi-annual)Cattle on Feed (Monthly)Cold Storage Stocks (Monthly)Livestock Slaughter (Monthly and annual)Hogs and Pigs (Quarterly)Meats Trading History

The Chicago Mercantile Exchange introduced futures trading on meats in 1961 with the frozen pork belly futures contract (sides of bacon stored in freezers). CME introduced a futures contract on live cattle in 1964, an innovative move because futures were only traded on storable commodities such as grains at the time.

Since then, the live cattle futures contract has undergone significant changes, and each of these changes has enhanced the usefulness of the contract in risk management programs. These tools enabled cattle producers to manage their price risk more effectively. CME continues to work with the cattle industry to meet producers' changing needs by improving the live cattle futures contract. In addition to live cattle futures, live hog futures were added in 1966 and feeder cattle futures in 1971.

In 1997, lean hog futures and options replaced the live hog contracts. In 1999, stocker cattle futures and options were added.

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Oats Market Trading

Oats Trading Defined and Explained

Trading in the oats market is often profitable because oats are a staple in many industries and many world markets. The primary uses for oats include feed for animals and breakfast foods for humans. Additionally, oats are used in the manufacture of plastics, solvents, and other industrial products.Oats Investing

Trading in oat futures and options at the Chicago Board of Trade (CBOT) gives investors the ability to earn a profit on swings in prices and gives farmers, ranchers, grain processors, millers, merchandisers, and livestock feeders a way to manage their price risk, whether they are selling as producers or buying for consumption.Oats Prices & Rates

Oat futures are like the other grain contracts traded at the CBOT, trading in both the electronic and open-outcry marketplace.

The contract size is 5,000 bushels.

Oats futures contract months are March, May, July, September and December.

The minimum tick is $0.0025 per bushel, worth $12.50 per contract, and the daily oats price limit is 20 cents, worth $1,000 per contract.

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Oats Trading Strategy

The U.S. oats trading outlook is favorable for continued expansion of grain trade among the three NAFTA partners, the United States, Canada, and Mexico. The oats market has benefited in many ways from NAFTA, and the Canadian oats are welcomed by U.S. processors, who utilize the product to shore up domestic oats deficits. U.S. oats production has declined dramatically to about 1.5 million acres over the years due to competition for acres from other crops and now meets just two-thirds of domestic consumption needs. As a result, U.S. oats traders and growers need to be aware of crop conditions in Canada and how changes in the value of the Canadian dollar relative to the U.S. dollar might affect pricing in the oats market.

Oats Trading Tips

As a feed grain, oats pricing tends to run in line with corn that is, the oats market will often track changes in corn production and demand. In some cases, oats can be a lower volatility environment to trade the feed grains market than corn. Several other points are worth noting: (1) Watch weather and other developments in the spring wheat areas stretching from the U.S. Great Lakes area to the Pacific Northwest as well as in Canada. This is the same area where most of the oats is grown, and oats will be subject to the same moisture or other influences as spring wheat. (2) When you look at acreage figures as an oats trader, be sure you are looking at oat acres harvested for grain. As a grass, some acres sown to oats are harvested for hay or used to graze livestock

Oats Trading Major Indicators

Oats prices are often influenced by changes in supply or usage reflected in U.S. Department of Agriculture (USDA) or Statistics Canada reports. The U.S. area devoted to oats production has been trending downward since farmers have been able to get higher returns from planting corn, soybeans and wheat or by marketing these grains through animals. Oats traders must pay attention to the oats market on a global scale and specifically in North America.

Oats Trading News

There are numerous sources of news for oats trading that may be helpful to traders. The Chicago Board of Trade supplies a daily newsletter and daily charts and performance on ticks and pricing for oats trading. The USDA provides regular reports that cover oats production and usage, in addition to weekly updates on crop conditions during the growing season and a weekly national grain market review. The National American Millers Association provides news and educational information to consumers. The Grains Council of Australia (GCA), and the Grains Research and Development Corporation (GRDC) provide information and news for the oats trade in Australia.

Oats Trading Information

Oats are sown in the spring, as soon as the soil can be worked. The major U.S. oats production area is in the upper Midwest although Texas also is a large oats producer. An early start is crucial to good yields as oats will go dormant as the summer temperatures climb. Oats are cold-tolerant and are usually not affected by late frosts or snow. Typically, the seeding rate is about 2 bushels per acre, either from broadcast planting or drilled in narrow rows, and the national average yield is around 60-65 bushels per acre although some areas can produce 80-100 bushel yields in good years.

Oats Trading History

Oats are native to Eurasia and appear to have been domesticated relatively late. Oats have a lower summer heat tolerance than other cereals like wheat, rye or barley, so are particularly important in areas with cool, wet summers such as northwest Europe, even being grown successfully in Iceland. Oats are an annual plant and can be planted either in the fall or in the spring although most of the crop grown for grain is sown in the spring season in the Northern Hemisphere.

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Wheat Trading

Wheat Trading Defined and Explained

Wheat is a grass that is cultivated worldwide. The global grain trade has always been of interest to investors because wheat represents one of the single most important components of world food consumption. Wheat is one of the worlds key staple products, with about 10 percent of production traded on world markets each year.

Wheat Market Investing

Investing in wheat futures allows traders to participate in the agricultural markets without holding a physical market position. Investing in wheat futures also provides growers with a risk management tool to protect the price of their expected purchase or sale of physical grain. The United States is one of the world's largest wheat producing countries. Japan is one of the largest importers of wheat in the world, with imports originating from Australia, Canada, and the United States. Exportable wheat supplies are also available from Argentina, Europe, Ukraine and other areas of the world, depending on crop situations. This makes wheat a truly global market and allows traders to enter into a global environment to create a broad trading strategy using wheat alone or in combination with other grains.

Wheat Futures Classes and Trading

Wheat comes in several classes, which are used for special purposes. Hard red winter wheat is by far the largest class. Kansas is the largest producing state so weather there is a key factor that wheat traders need to monitor, but hard red winter wheat is grown in the Plains from Texas to South Dakota. This type of wheat is milled into flour used for breads. Hard red winter wheat futures are traded at the Kansas City Board of Trade. Soft red winter wheat is grown primarily in the eastern Corn Belt from Missouri to Michigan and is milled mainly for flour used in crackers, biscuits and cookies. Soft red winter wheat futures and options are traded at the Chicago Board of Trade. Hard red spring wheat is grown primarily in the Dakotas and Minnesota, with North Dakota the largest producing state. This type of wheat is milled into flour used in breads, bagels and hard-baked goods. Hard red spring wheat futures are traded at the Minneapolis Grain Exchange. All three of these classes of wheat futures are now traded electronically on the CME Groups Globex trading platform. Several other classes of wheat are not traded as futures white wheat grown mainly in the Pacific Northwest and durum wheat used in pastas in the same areas as spring wheat.

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Wheat Prices / Rates

The main wheat futures contract at all three exchanges where wheat is traded is for 5,000 bushels of the specified wheat although CME Groups Chicago Board of Trade also trades a mini wheat futures contract of 1,000 bushels. The minimum price fluctuation is 1/4 cent per bushel, indicating a change in value of $12.50 for the 5,000-bushel contract. Wheat contracts are traded on July, September, December, March, and May calendar months.

Wheat Production

Spring wheat is planted just prior to or in April in the United States and Canada and generally follow the pattern of spring planted crops. These wheat crops do not go through a dormant stage but mature until harvested in late summer.. Sowing of winter wheat begins in September in the northern United States and continues through October in the southern regions. These "winter" wheat crops will sprout and grow in the fall until a winter freeze occurs, and the wheat will then become dormant until spring, when it breaks out of dormancy and matures until harvest in June-July. Alternating freezing and warming periods can damage the winter wheat crop and reduce yields, especially if there is no snow cover protection.

Wheat Usage

Wheat usage for food and seed is relatively inelastic that is, there isnt a huge change in U.S. consumption patterns from year to year. Until recently, U.S. wheat producers could count on rising per capita food use of wheat flour to expand domestic demand for their crop. The strength of this domestic market developed out of the historic turnaround in U.S. per capita wheat consumption in the 1970s. With pasta and pizza now established in U.S. diets, consumer requirements for wheat for bread, pasta, cereal and other food uses have tended to level off and not deviated as much in recent years. Wheat can also be used as an animal feed when competitive crops like corn and milo/sorghum become too expensive. Because which grain to use is an economic decision based on pricing, the quantity of wheat used in feed rations can vary from minimal amounts to several hundred million bushels a year.

Wheat Trading Strategy

Like most crops, wheat tends to follow a seasonal price pattern based on the weather. If the winter wheat crop has broken dormancy in good shape and spring rains are sufficient, wheat prices may decline seasonally going into the harvest period as the market assumes an injection of new, larger wheat supplies. After harvesting reveals the size of the crop, wheat prices tend to move up seasonally from June/July through the end of the year. This seasonal price pattern is also the basis for a typical wheat/corn spread that is, buy wheat in June/July when prices presumably are at their lowest level of the season and sell corn, which often rallies to a seasonal high in mid-summer based on weather fears.

Wheat Trading News

The U.S. Department of Agriculture conducts a variety of market outlook activities on the wheat industry. The major market news often comes from the monthly crop reports and updated Supply/Demand estimates released around the 10th of the month. Details on major changes and events in domestic and world wheat markets are published 11 months of the year in the USDA Wheat Outlook publication. The USDA Wheat Yearbook provides a recap of the previous market year and outlook for the current market year. Long-term supply utilization projections for wheat are published in USDA's Agricultural Baseline Projections. The Australian Wheat Board, the Canadian Wheat Board, and the Japanese Food Agency are all major sources of wheat export/import information.

Australia, Canada and Japan all use a government single-desk agency to control wheat trade in their countries. Like many industries around the world, Australias grain industry promotes continued export growth and usage. The Grains Council of Australia and the Grains Research and Development Corporation provide information and news for the wheat trade in Australia.

Wheat Trading Tips

As a crop grown in many areas of the world, wheat has a fairly stable price history and more trend-based moves compared to other commodity sectors. However, traders and investors in the wheat market must understand how intermarket influences affect the market on a continuous basis. U.S. wheat has to compete with crops such as corn, milo/sorghum, oats, soybeans and sunflowers, depending on the area of the country, so production incentives in the U.S. can influence wheat production. As a result, wheat prices tend to trade in concert with prices for other crops, sometimes as a leader but more often as a follower. So traders need to be aware of intermarket pricing of several different commodities. One other tip for winter wheat traders: Traders tend to kill the crop several times in the spring when it may be too cold, too hot, too dry, too wet or feature some other weather extreme. But winter wheat can be a pretty hardy crop. Be wary of rumors and market chatter and keep crop prospects in perspective.

Wheat Trading History

Wheat originated in southwest Asia and was domesticated about 10,000 years ago. Cultivation and repeated harvesting and sowing of the grains of wild grasses led to the selection of more resilient heads of wheat and larger grains. Although todays wheat is resilient and resistant to disease, because of the loss of seed dispersal mechanisms, domesticated wheat cannot survive in the wild.

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Corn Trading Defined and Explained

Trading in the corn market is appealing because of the wide scope of products for which corn is used for. In addition to its primary use as a feed for livestock including cattle, hogs and poultry and its use as a food for human consumption, an increasingly large share of U.S. corn production is now used to produce ethanol for fuel. Among the many widely used byproducts into which corn can be transformed are corn oil, corn starch and corn sweeteners used in soft drinks in the food area and absorbing agents for disposable diapers and adhesives for paper products and plastics in the non-food area. Corn Prices & Rates

The Chicago Board of Trade is the premiere corn futures trading exchange in the world today.

The pricing unit for corn futures trading is dollars and cents per bushel with a minimum price fluctuation of one-quarter of a cent per bushel or $12.50 for a full-size, 5,000-bushel contract.

The CBOT also offers a mini-sized corn futures contract of 1,000 bushels (about 25 metric tons).

Corn futures contract months are March, May, July, September and December..

Corn Trading Supply Information

Varieties of corn are grown in a number of areas of the world including Brazil, Argentina, China and elsewhere, but corn futures traded at the CBOT are based on U.S. production. Much of the U.S. corn crop is grown in the Corn Belt stretching from Nebraska to Ohio and from Minnesota to Missouri. The number of acres planted is a critical starting point for the size of the U.S. corn crop. Compared to other feed grains and soybeans, input costs for corn are higher, and prices for fertilizer, fuel and other input items sometimes influence farmers to plant other crops that have lower production risk. When all goes well, corn can also produce the highest return per acre. Most of the corn in the Corn Belt is planted in April-May. The most critical period for determining yields and the amount of corn production in a given year is during July, when pollination typically occurs. Although other crops can recover from unfavorable weather conditions, corn is especially subject to yield losses from hot, dry conditions during this 2-3 week pollination period. Most of the corn harvest takes place in October-November. About 90-92 percent of planted acres are harvested for grain with the remainder being cut for silage, abandoned due to the effects of weather or not used for grain production for some other reason. The timing of these periods depends, of course, on the planting and emergence dates of the corn crop and the progress the crop makes during the growing season.

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Corn Trading Usage Information

Most of the U.S. corn crop has been consumed as feed by cattle, hogs or poultry in the past, but corn usage is now split about evenly between feed for animals and food/industrial uses. The reason for the jump in food/industrial use is due the increase in the amount of corn used in ethanol production, accounting for roughly a third of the annual U.S. corn output. About 2 billion bushels of U.S. corn is exported annually as the United States is the worlds largest corn supplier by far. Other export suppliers include Argentina and Brazil and, to a lesser extent, South Africa and Thailand.

Corn Trading Strategy

When trading corn futures, seasonal analysis can be a powerful asset. Depending on yield prospects and the total supply of corn available, corn futures prices tend to weaken going into and during the early part of the fall harvest season. Then as corn moves into grain bins and demand picks up from larger animal numbers and exporters trying to get corn into position to ship, corn prices begin to pick up. Sometime after the first of the year, the so-called February break causes corn prices to decline again. As the planting season approaches and the market tries to buy corn acres, corn futures prices firm up until the market sees how the crop is doing. Summer often produces a number of rallies and subsequent setbacks based on weather or the latest forecast. Obviously, the typical seasonal corn price pattern is subject to change, depending on conditions, but it gives corn futures traders and hedgers a road map to follow by tracing the average behavior of the corn market in the past.

Corn Trading News

The U.S. Department of Agriculture releases a number of reports related to corn supply and usage. The annual crop summary in January sums up the final production numbers from the previous year and reveals the stocks of corn in all positions as of the end of the year. The first big report for the new season is the planting intentions report released at the end of March. The planted acreage report at the end of June reveals how many corn acres were actually planted. USDA releases updated supply/usage estimates every month around the 10th of each month, but the major reports are the production projections in July and the production estimates based on actual surveys in August through November. For the dates of these key reports, see www.TraderEducation.com. During the growing season, USDA provides weekly reports on corn crop progress and crop conditions on both a state-by-state and national basis and reports new corn export sales and actual shipments. In addition, universities and extension services in the major production states provide a great deal of information about corn production and the economics of raising corn and other crops. So there is plenty of fundamental information for the corn futures trader to consider in making a trading decision.Corn Trading Tip

The major source of demand for corn for years has come from feed for cattle, hogs and poultry, meaning corn futures traders also needed to monitor animal numbers to gauge the extent of corn usage during the season. But corn has expanded from just a feed and food source to become a major fuel source in recent years as a result of government mandates to include ethanol in gasoline. Corn is the primary source of ethanol, causing a huge increase in the amount of corn consumed. That means corn futures traders now need to watch developments in the energy market very closely for clues to corn prices for several reasons. The first is the price of crude oil and its impact on the consumption of gasoline. On the one hand, high oil prices support high corn prices. On the other hand,

high oil prices could lead to less demand for gasoline and the need for ethanol in a recessionary environment. The second reason is government policy for energy prices and ethanol usage and any adjustments the government might make in those policies. Until another source for ethanol comes along, consider corn as one facet of the energy industry.Corn Trading History

Early Native American corn crops were first cultivated by the Mayans. Today, even as advanced hybrids being grown are resistant to pests and chemicals, corn remains a staple crop at the center of agriculture. One interesting note is that corn as we know it today would not exist if it weren't for the humans who cultivated and developed it. Corn is actually a plant that does not exist naturally in the wild. It can only survive if planted and protected by humans. Corn is one of the two original commodities traded as futures contracts on a U.S. exchange. Corn futures trading began at the Chicago Board of Trade in 1852. The original corn futures or forward contract was for 3,000 bushels instead of the full-size 5,000-bushel contract traded today. Corn futures remain one of the most liquid grain futures contracts.

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Frozen Pork Bellies Trading

Pork Bellies Trading Defined and Explained

Pork bellies refer to the cut of pork meat obtained from the underside of a hog carcass used for bacon. Frozen pork belly futures contracts (bacon in storage) are influenced by factors that affect the supply and demand for hogs, other pork products and competing meats. Trading Frozen pork belly futures contracts perform the same two primary functions common to many futures contracts guiding inventories and establishing forward pricing.

Frozen Pork Bellies Futures Investing

The pork bellies market is not for the faint of heart unless you have the benefit of either deep pockets or knowledge of the industry. Trading in frozen pork bellies contracts developed as a risk management device to meet the needs of meat packers and meat distributors who have to contend with volatile hog price swings.Frozen Pork Bellies Prices & Rates

A frozen pork belly futures contract consists of 40,000 pounds of frozen pork bellies, cut and trimmed, where 1 point = $.0001 per pound ($4.00).

Historically, wide price swings are not unusual in trading pork belly futures; where trading has been accentuated by speculative interests in the past but do not trade in the large size volume as they once did.

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Frozen Pork Bellies Trading Strategy

There are definite seasonality aspects for pork bellies production and trading. Pork bellies are storable, and the movement into cold storage builds early in the calendar year, peaking about mid-year. Net withdrawals from storage then carry stocks to a low around October. There is no pork belly futures contract for the months between August and February because storage is not a large factor during that period. Demand for pork products in general tends to increase around the winter and Easter holiday season, and no matter what production practices are used, this seasonal demand by consumers still affects the pace of hog slaughter and both cash and futures pricing of pork including pork bellies. Although management methods have improved to keep a constant, year-round supply of hogs, demand side factors still play an important role in pricing in the hog industry. Few commodities offer the profit potential and market action of trading frozen pork belly futures. However, with great profit opportunity often comes risk, and the trading of frozen pork belly futures remains the domain of aggressive, highly speculative individual traders.

Frozen Pork Bellies Major Indicators and indices

Frozen pork bellies are traded at CME Group with five monthly contracts February, March, May, July and August. The last day of frozen pork bellies trading is the first Friday of the delivery month of the underlying futures contract. Reviewing the factors that can affect the final number of hogs slaughtered demonstrates that the quarterly Hogs and Pigs report from the U.S. Department of Agriculture is not a perfect predictor of hog slaughter nor pork belly storage figures. Other factors are not easily quantifiable, such as producer behavior or weather, which also influence hog slaughter. Frozen Pork Bellies Trading Information

Traders can obtain information regarding hog pricing and trends, depending on the stage in the pipeline they are studying. This data can be obtained from the monthly Livestock Slaughter report published by USDAs National Agriculture Statistical Service, which provides statistics on total hog slaughter by head, average live and dressed weight in commercial plants by state and in the U.S., information about federally inspected hogs, and additional slaughter data. Finally, frozen pork bellies traders can get information in reports published by USDAs Economic Research Service (ERS), including Livestock, Dairy and Poultry Situation and Outlook and Red Meat Yearbook, which provides data on imports and exports and offers monthly, quarterly, and yearly statistics separated out by selected countries on a carcass weight and live animal basis. CME Group also provides seasonal pork bellies pattern and weekly continuation charts.

Frozen Pork Bellies Trading Tips

Frozen pork bellies future trading can involve sharp daily price movements and, therefore, pose a risk to your trading capital. Those involved in pork belly futures trading should be fully aware of this prior to executing even their first trade. The frozen pork bellies trading arena may be best suited for those with a working knowledge of the hog industry or those with sufficient capital to withstand substantial price fluctuations. As a leveraged investment requiring that only a small percentage of the contracts value be posted as a performance bond, frozen pork bellies futures can lose more than the amount of money deposited for the futures position! Therefore, traders should only use funds that they can afford to lose without affecting their lifestyle.

Frozen Pork Bellies Trading History

When the public thinks of commodity trading, pork belly futures often come to mind because of attention they received in media reports. In 1961 the CME pork belly contract became the first futures contract based on frozen, stored meats. Chicago Mercantile Exchange, which was established in 1919 as the successor to the Butter and Egg Board that had been established in 1898, later added live cattle and hog futures contracts and then moved from physical pork bellies and livestock contracts into what were described as pork bellies in pinstripes stock index futures and options.

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Soybean Trading

Soybean Trading Defined and Explained

Soybeans are one of the most popular oilseed products in the world and have a wide range of uses, from food and feed to industrial materials. Trading soybeans futures on a global scale is seen as a profitable endeavor as soybean products are especially appreciated in Asia and among global natural-food enthusiasts. Many publications are now printed with soy ink, which is becoming an increasingly popular alternative to petroleum-based inks. Investing in Soybeans

Investing in soybean options and futures makes sense to many traders as soybeans are increasingly being seen as a renewable resource with many industrial applications as well. Diesel fuel with a soybean foundation is a new energy source that's capturing the attention of the trucking and construction industry. At some point trading in the soy market may take on some features that are similar to energy futures trading. Soybeans are also being used successfully in cleaning products, adhesives, polyesters, and other textiles.

Soybean Prices & Rates

Two soybean futures contracts are traded at the Chicago Board of Trade.

The main contract is for 5,000 bushels (about 136 metric tons) and a mini-sized soybean futures contract is 1,000 bushels (about 27 metric tons).

The soybean pricing unit is dollars and cents per bushel with a minimum price fluctuation of cent ($0.0025) per bushel or $12.50 per contract.

The daily trading limit for soybean futures is 70 cents per bushel ($2,500).

Trading months for soybean futures are January, March, May, July, August, September, and November.

Electronic trading of soybean futures takes place between 6 p.m. and 6 a.m. Sunday through Friday and side by side with open-outcry trading from 9:30 a.m. to 1:15 p.m. Monday through Friday.

There are several other options for trading soybeans:

Options on CBOT soybean futures

The CBOT South American soybean futures contract

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Soybean Trading Tips

Watch how the seasonal pattern develops for soybean futures. Typically, soybean prices come under pressure before and during the U.S. harvest season in September-October when an increase in supply is anticipated or realized. But the winter is also the largest demand period for soybean meal in livestock feed so soybean crushers and soybean exporters begin to bid up prices in late fall or early winter before all of the soybeans get locked up in farm bins. Then after the first of the year soybean and grain prices sometimes endure a February break as the rivers freeze up and barge transportation is limited and as farmers deliver the crop they had been holding for tax or other reasons. In the past the attention then began to focus on new-crop soybeans and the uncertainty about planted acres and summer growing conditions, causing soybean prices to rise into summer as soybean supplies diminished. However, the rise in South American soybean production and exportable soybean supplies in March-April has modified the seasonal pattern. The price structure of soybean futures contracts usually includes a carry charge to cover the cost of interest, insurance, etc. that is, the price of March soybean futures should be, perhaps, 10-12 cents higher than for January soybean futures for that reason alone. But if the prices for front-month soybean futures are above prices for the more

distant contract months, the market is saying it wants the soybeans now and is evidence of demand. Traders should be alert to these price influences on soybeans and should be using a technical indicator like moving averages to get a clearer picture of the market trend.

Soybean Trading

Soybean futures trading has been very popular with speculators, producers and commercial interests throughout the years because soybeans typically have broad price fluctuations and have multiple uses that make soybeans a true global market. Traders can also analyze the soybean market by looking at the price activity of its two major byproducts 44-48 pounds of soybean meal and 10-11 pounds of soybean oil for every bushel of soybeans. Trading soybeans allows investors to make a profit and helps farmers get a better average price for their crop. By understanding technical indicators, soybean traders or farmers can get in and out of contracts profitably.Soybean Trading Strategy

Because soybeans are such a dynamic and broad trading category, trading in the soybean complex lends itself to multiple strategies whether trading soybean futures or soybean options alone or in combination with other futures contracts. There are a number of spreading opportunities including trading old-crop soybean futures against new-crop soybean futures, soybean futures against corn or wheat futures or soybean futures against soybean product futures. In soybean trading, crush has several meanings. It refers to both the physical process of converting soybeans to soybean by-products, soybean oil and soybean meal, and the trading strategies known as the soybean crush and reverse soybean crush. Soybean crushers use soybean, soybean oil and soybean meal futures to protect their gross processing margin. They purchase soybean futures to be protected against rising input costs and sell soybean oil and soybean meal futures to be protected against falling product prices. Soybean crushers could also use CBOT Soybean Crush Options to protect their processing margin.Soybean Trading News

The USDA publishes data regarding Soybean production in the United States as well as other major producing areas of the world and estimates of usage including exports. Weekly reports update crop conditions during the growing season, both for key states and for the country as a whole. The Commerce Department provides regular reports on soybean crushing. The CBOT also presents daily and weekly information on soybean trading in the U.S. as well as soybean trading overseas.Soybean Trading Information

Most of the U.S. soybean crop is planted in May and June, usually after cotton planting is done in the South and corn planting is done in the Midwest. Depending on prices and weather, soybeans may be planted on many winter wheat acres after the wheat is harvested in June. These double-cropped acres are more vulnerable to hot weather in the summer and typically do not yield as well as full-season soybeans. The most critical pricing periods for soybeans tend to occur in conjunction with private and USDA

planting intentions report at the end of March, with weekly crop condition updates, with monthly crop reports released around the 10th of the month during the growing season and with quarterly stocks reports. Weather is also a critical factor for soybean prices, especially heat and moisture conditions during the blossoming and pod-filling stages for soybeans in late July and August.Soybean Trading History

Soybeans originated in China but over the centuries have been cultivated in many temperate areas around the globe. For many years the United States was the worlds major soybean producer and exporter, but in recent years soybean production has increased dramatically in Brazil and Argentina. Although the United States still exports more than a billion bushels of soybeans in a year, the U.S. share of total world soybean exports has decreased as South American soybean production and trading has expanded. China has been a major soybean producer and exporter in the past, but with its large population and domestic demand, China has become a major soybean importer and its soybean purchases or lack of them have become a significant factor for soybean prices.

According to the Smithsonian, Henry Ford even promoted soybeans, helping to develop uses for it in both food and in industrial products, even demonstrating auto body panels made of soy-based plastics. Henry Ford's interests in soybeans led to 2 bushels of soybeans being utilized in each Ford car.

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Soybean Oil Trading

Soybean Oil Market Defined and Explained

Each bushel of soybeans produces about 11 pounds of soybean oil and about 48 pounds of soybean meal so the soybean oil market is often closely tied with developments in the soybean market when external factors come into play. It has been estimated that about one-fourth of the worlds supply of edible oil comes from soybeans so soybeans have plenty of competition from other sources. Soybean oil is used to make many diverse products such as salad and cooking oils, shortenings and margarines. Soy oil is also an increasingly important ingredient for industrial products such as paints, plastics, lubricants and biofuels. Soybean Oil Investing

The practice of trading soybean oil is important to the food and fuel industries as soybean oil futures and options provide the foundation to stabilize often volatile soybean oil prices. Price stability is essential for those businesses that rely on soybeans for their manufacturing processes. Global soybean oil supplies fluctuate constantly due to spring planting decisions and crop progress reports, as well as variations in rainfall and temperature over the growing season. In addition, soybean oil demand never ceases to change. As a result, prices can vary substantially from day to day, and soybean traders

should take note of the market volatility and impacts from intermarket factors. Investing in soybean oil appears to have merit as the need continues to grow for readily biodegradable lubricants that are low in toxicity for environmentally sensitive areas.

The superior qualities of soy oil have been recognized in Europe and by the U.S. government, and developing new commercial uses for soybean oil is a research priority of the United Soybean Board (USB) and the American Soybean Association. Using soybeans as a fuel product has gained momentum because high fuel prices have made it economically feasible to use renewable agricultural products in green fuels such as ethanol made from corn and sugar and biodiesel fuels made from soybean oil. These fuels have the potential to lessen greatly U.S. dependence on foreign oil. Biodiesel fuel made from soybean oil is being used more and more as an alternative to pure petroleum-based diesel fuel. Biodiesel decomposes as quickly as sugar and is 10 times less toxic than salt. Soybean oil offers many uses and makes it one of the most versatile agricultural commodities for potential soybean oil traders. Soybean Oil Prices & Rates

Soybean oil futures and options trade at CME Groups Chicago Board of Trade.

The contract size for soybean oil trading is 60,000 pounds.

One tick size is 1/100 cent, making the minimum price fluctuation per tick $6.00 per contract.

Contract months for soybean oil trading are October, December, January, March, May, July, August, and September.

The last trading day for soybean oil is the business day prior to the 15th calendar day of the contract month.

The last delivery day for soybean oil trades is the last business day of the delivery month.

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Soybean Oil Trading Information

Corn and soybeans are planted in the spring in the United States. Soybean field preparation and planting typically lasts from mid-March through the end of June if soybeans are doublecropped after the winter wheat crop is harvested in southern areas, but the primary planting period in the Midwest where most of the soybeans are grown is during May. Like corn, soybeans are vulnerable to hot, dry weather during the summer growing season. The most critical month for determining soybean yields and the size of the U.S. soybean crop is usually August when blossoming and pod-filling occurs and the quality and amount of soybean oil per bushel of soybeans is determined. A freeze before the soybean plant fully matures in September can be devastating for soybean oil quality.

Most of the soybean crop is typically harvested in September-October, and soybean oil prices tend to trend up after harvest as the rate of usage trends up.

Soybean Oil Information Resources

Soybean oil has more sources of information available than many other agricultural commodities. In addition to all of the U.S. Department of Agriculture reports on soybean acreage, production, stocks, crop progress, etc., the U.S. Census Bureau also releases a monthly report on the size of the U.S. soybean crush and statistics about the amount of soybean oil and other edible oils in storage. The National Oilseed Processors Association (NOPA), organized as the National Soybean Processors Association (NSPA) in 1929 and renamed in 1989, also releases a widely followed report estimating monthly crush statistics. Another publication that has been prominent for many years in the global edible oils market is Oil World, sometimes called the Bible of the industry.

Soybean Oil Trading Strategy

Seasonal patterns run high in soybean oil futures and have consistently influenced the market over the years. Soybean oil traders should understand the underlying intermarket circumstances that tend to cause all futures markets in the soybean complex to react in similar directional manner during a certain calendar year. Soybean oil traders must understand the critical stages of soybean oil development and how the markets tend to react during these seasonal moves. In a typical season, soybean oil prices should weaken in line with soybean futures into the U.S. fall harvest period as the market sees more supply becoming available and the size of the soybean crush at its highest rate of the year. Seasonal trends are not the only factor in a soybean trading strategy as traders must analyze how supply and usage of soy products will affect future value and how reports and statistics have historically influenced price direction.Soybean Oil Trading Tip

Developments in the source of soybean oil, the soybean crop, are obvious most important to track for the soybean oil trader, but one of the keys to understanding soybean oil prices is understanding what is going on in soybeans other major product, soybean meal. At times the demand for soybean meal will dictate the pace of the soybean crush and, therefore, the amount of soy oil available. At other times the demand for soy oil may be the controlling factor in the pace of soybean crush, meaning that either soybean oil or soybean meal could be an excess byproduct as a result of the soybean crushing process. Another important tip for the soybean oil trader is that, while soybean meal has a dominant position in U.S. feed rations for livestock and poultry, there are many other sources of edible oil other than soybean oil, including canola, palm, flaxseed, safflower, sunflowers, peanuts, cottonseed, etc. Some of these other crops are grown specifically for their oil content so their edible oil production may fluctuate without regard to demand for another byproduct. Consequently, soybean oil traders must monitor the whole global edible oil situation to see how the supply and usage of other competitors may affect the price of soybean oil.Soybean Oil History

Soybeans are native to Northeastern Asia and were first introduced into the United States in 1765 (Soybean Research Advisory Institute). With the majority of cultivation located in the Midwestern and southern United States, the United States produces about 3 billion bushels a year, and soybeans are the second most valuable crop in the United States behind corn (Soybean Research Advisory Institute). For many years the United States reigned as the worlds largest producer of soybeans and the major soybean supplier to the world export market, but production in South American has brought that area to the forefront of the soybean export market, including soybean products.

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Grains Market Trading

Grains Trading Defined and Explained

Grain trading has been around since the beginning of civilization.The grains futures contracts of today are cousins of ancient trading and are as important now as they were then.In history, grain merchants and grain traders took huge risks, and the whole enterprise was speculative. Rains could affect the harvest, storms at sea could sink a ship, and there was always the risk of pirates. While todays grain traders do not typically have to deal with pirates, they continue to need ways to help stabilize grain prices and profit from grain trading while minimizing their risk from external factors.Thats where grain trading futures and options come into play. Grains Prices & Rates

Grain Trading has the advantage of having two different levels to trade on.These levels are in response to growers typically taking larger contracts.

Mini-sized grain trading contracts

Full-sized grain trading contracts

These full and mini-sized contracts allow grain traders to choose the product size that best meets their needs. Grains Market Investing

Investing in grains provides growers with a risk management tool to protect the price of their expected purchase or sale of physical grain or oilseeds. It also allows traders to participate in the agricultural markets without holding a physical market position.

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Grains Trading Strategy

The Chicago Board of trade acts as the primary intermediary for trading grains futures. A CBOT agricultural futures contract is simply an agreement to buy or sell grain or oilseeds at some later time at a price agreed upon today. Futures contracts are standardized with regards to the quantity, quality, time and place of delivery. The variable in a specific grain futures contract is price.

After gaining an understanding of the production cycles of grains and their related products, it is important to recognize how that knowledge combines with economic factors that affect each industry. When grain traders approach the industry, they rely on supply and demand factors, as well as an understanding of the grains product cycle and seasonality issues. Traders need to examine the relationship between economic conditions and grain prices.

Grains Trading Major Indicators and indices

Agricultural indicators are based on monthly contracts.Additionally, short-term serial options are listed for months not included in the standard futures month cycle.

Grains Trading Information

Global supply and demand for grains and oilseeds are hosted at the Chicago Board of Trade in the form of bids, or expressions to buy, and offers, or expressions to sell. Because most of the grain trades in the U.S., there is a strong correlation between the Chicago Board of Trade agricultural futures prices and the prices in the physical commodity markets.Grains Trading History

The grain trade had been important as far back as when Egyptian merchants supplied Rome. The Mediterranean grain trade was so important that the nineteenth-century Italian historian Lodovico Bianchini indicated that grain was responsible for more espionage than the Inquisition. Today, the Chicago Board of Trade (CBOT), established in 1848, is a leading futures and options exchange in the grain futures market.Breaking News

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Soybean Meal Trading

Soybean Meal Trading Explained

Each bushel of soybeans produces about 48 pounds of soybean meal and 11 pounds of soybean oil so the soybean meal market is often closely tied with developments in the

soybean market when external factors come into play. Soybean meal is the dominant protein supplement used in livestock and poultry feeds so herd and flock numbers are major influences on soybean meal consumption and prices. Soy products are also used to manufacture foodstuffs, diet-food products, beer and noodles. Technical uses include adhesives, cleansing materials, polyesters and other textiles. Soybean Meal Prices & Soybean Meal Rates

Soybean meal futures and options are traded at CME Groups Chicago Board of Trade. The contract calls for physical delivery of 100 short tons (about 91 metric tons) of soybean meal. Like most CBOT agricultural contracts requiring physical delivery, the majority of the soybean meal futures positions are offset prior to the delivery period.

The pricing unit for soybean meal futures is in dollars and cents per short ton with a tick size (minimum price fluctuation) of $0.10 (ten cents) per short ton or $10 per contract.

Depending on market conditions, the soybean meal futures price may change by several ticks at a time but always in multiples of the ten-cent increment.

The months for trading soybean meal contracts are January, February, April, June, August, October, and December.

The last day of trading for soybean meal futures contracts is the eleventh business day of the contract month.

Soybean Meal Investing

Investing in soybean meal makes sense to a broadening range of traders as soybeans are increasingly being seen as a renewable resource not only for animal feed but also with its industrial applications. Diesel fuel with a soybean foundation has gained a wider following as an energy source, capturing the attention of the trucking and construction industry. So the economies of these markets impact soybean meal trading as well, an example of intermarket influence.See how VantagePoint Software can predict the soybean meal futures market with up to 86% accuracy* - Get Free Soybean Meal Market Predictions now.

Soybean Meal Fundamental Background

Corn and soybeans are planted in the spring in the United States. Soybean field preparation and planting typically lasts from mid-March through the end of June if soybeans are doublecropped after the winter wheat crop is harvested in southern areas, but the primary planting period in the Midwest where most of the soybeans are grown is during May. Like corn, soybeans are vulnerable to hot, dry weather during the summer growing season. The most critical month for determining soybean yields and the size of the U.S. soybean crop is usually August when blossoming and pod-filling occurs and the quality and amount of soybean meal per bushel of soybeans is determined. Most of the soybean crop is typically harvested in September-October, and soybean meal production

usually increases in the winter quarter to its largest level of the year to coincide with the period when animal numbers are usually at their greatest.

Soybean Meal Trading Tips

Soybean meal and soybean oil production and price prospects are intertwined so a soybean meal trader should not be trading one without being aware of what is happening to the other as well as what is happening in the soybean market in general. At times the demand for soybean meal will dictate the pace of the soybean crush and, therefore, the amount of soy oil available. At other times the demand for soy oil may be the controlling factor in the pace of soybean crush, meaning that either soybean oil or soybean meal could be an excess byproduct as a result of the soybean crushing process. You cant have one without the other. Although soybeans and soybean products are closely related, there are several key differences. First, while there are many competing edible oils on the world market for soybean oil, the competition for soybean meal is less intense in the United States. Fishmeal, cottonseed meal and other sources may provide feed protein but soybean meal is the main source with poultry being a major consumer. Second, while soybeans can be stored for some time while waiting to be crushed, soybean meal cannot be stored for long periods of time, especially in hot weather. So the supply of soybean meal is more of a hand-to-mouth situation, which can lead to surplus or tight situations, depending on the crush rate. If a lot of soybean meal is available, that can pressure prices.

Soybean Meal Trading News

The U.S. Department of Agriculture is perhaps the best source of information about the supply of soybeans for soybean meal as well as animal consuming units. USDA releases monthly reports of supply/demand estimates for both the United States and the world as a whole including production and export prospects from major soybean growing areas. USDA also publishes situation reports that summarize the outlook from both a crop and feed perspective. The American Soybean Association is influential and a good source of information about everything related to soybeans including soybean meal. The National Oilseed Processors Association (NOPA) provides a monthly estimate of the U.S. soybean crush and publishes an official yearbook and trading guidelines for soybean meal and other soy products.Soybean Meal Trading History

Soybeans are a relatively new crop in the United States, but they have become an extremely vital component of the U.S. farm economy, both for domestic usages and for export income. Soybeans were first grown commercially in the United States in the 1920s as a forage crop and for fertilizer, and then became a major source of vegetable oil for food and protein for livestock feeding. Today, soybeans are an international crop, and their major production area has expanded to include South America as one of the main suppliers.

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Cocoa Market Trading

Cocoa Trading Defined and Explained

Cocoa is the dried and partially fermented fatty seed of the cacao tree from which chocolate is made. In the United States, 'cocoa' often refers to cocoa powder, the dry powder made by grinding cocoa seeds and removing the cocoa butter from the dark, bitter cocoa solids. Cocoa is the world's smallest soft commodity market.Cocoa Prices & Rates

Cocoa futures are traded on two primary exchanges:

Euronext.liffe in LondonIntercontinental Exchange (ICE, formerly the New York Board of Trade) in New York.The ICE cocoa futures contract is 10 metric tons (22,046 pounds).The price is quoted in U.S. dollars per metric ton.The minimum tick size is $1 per metric ton, equivalent to $10 per contract. Contract months are March, May, July, September and DecemberCocoa Trading Fundamentals

The cocoa tree requires the hot, rainy climate of a tropical rain forest so is generally grown in areas within 20 degrees north or south of the equator. It takes the cocoa tree about five years after planting to produce cocoa beans and about ten years to achieve peak production so changes in production capacity do not come quickly. Each pod of the cocoa tree produces 20-50 beans, and it takes about 400 beans to make one pound of chocolate. Most cocoa is harvested between October and January.

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Cocoa Trading Tips

Cocoa trading is an international market and subject to much intermarket influence from the value of the currencies in which the contract is quoted to the supply/demand issues for other tropical commodities. After cocoa traders develop a foundation of knowledge of the production cycles of cocoa cultivation and processing, it is important to recognize how that knowledge needs to be combined with an understanding of economic factors that affect each aspect of getting the cocoa from jungle to package. Traders need to examine the relationship between worldwide economic conditions and cocoa prices and trends.

Because it can be difficult to get accurate, reliable regional cocoa production information such as the size and quality of the crop, cocoa futures can be a difficult market to trade. Political turmoil seems to be a way of life in the main cocoa producing areas so cocoa futures traders need to be sensitive to how those issues will affect the flow of cocoa

supplies to the marketplace. Demand for cocoa is usually rather stable, so the supply situation is where the cocoa futures trader needs to focus.

Cocoa Trading Information

The most prominent source of cocoa trading information is probably the International Cocoa Organization, which publishes the ICCO daily price for cocoa that is used worldwide as a historical and trend reference. A number of other international resources include reports on cocoa trends, news and information. The Netherlands Cocoa Association gives production data for much of the world market. The UN Food & Agriculture Organization provides information on the impact that cocoa production and cultivation have on local markets and indigenous people of growing regions. Exchanges where cocoa futures are traded also offer resource material.

Cocoa Trading Strategy

Seasonal lows in cocoa prices tend to occur in January when the Bahia (Brazil) main crop becomes available and the market begins to anticipate declining consumer demand after the winter season ends. Consumer demand tends to rise going into late fall and early winter as processors accumulate supplies for the peak cocoa consuming period in the winter. However, seasonal tendencies in cocoa prices are usually not as strong as for some other commodities.

Cocoa Trading Supply

The largest cocoa producing countries are Cte dIvoire (Ivory Coast), which accounts for about 40 percent of world production; Ghana and Indonesia, about 15 percent each, and Nigeria and Brazil, about 5 percent each. The annual world production of cocoa ranges between 3 and 4 million metric tons.

Two main diseases are threats to cocoa production black pod disease in Africa and witchs broom in Brazil, a fungus that caused severe cocoa production problems in the 1990s. However, the biggest threat to consistent cocoa supplies tends to be political, social and labor issues, which frequently threaten to decrease or disrupt the supply of cocoa.

Cocoa Trading Demand

The leading cocoa bean importing nations are the Netherlands, United States and Germany, which account for more than half of world cocoa imports. The United States is the leading importer of cocoa products such as cocoa butter, liquor, and powder,

accounting for 12% of world imports in recent years. The Netherlands and the United States each process about 15% of the world's annual cocoa production.

The largest cocoa consumers are Europe, North America, Japan and Singapore. The United States consumes about 13 percent of the world's cocoa; Germany, 9 per cent, and France and the UK, about 7 percent each. The cocoa butter extracted from the bean is used in a number of products, ranging from cosmetic to pharmaceuticals, but its main use is in the manufacture of chocolate candy.

U.S. cocoa imports come from Latin America; Europe imports from Africa, and Asia imports from Indonesia.

Cocoa Trading History

Cocoa apparently originated in South America and was combined with spices and served as a luxury drink in the Aztec empire of Montezuma. It was introduced into Central America by the ancient Mayas, and served as a luxury drink in the Aztec empire. Cocoa was brought back to Spain in the 16th century by the Conquistadores. For nearly a century, chocolate (usually made from cocoa, sugar, cinnamon and vanilla) became an exclusive drink of the Spanish Royal Court, until it gradually achieved a wider popularity in cocoa houses of major European cities.

The Dutch were the major influence on the world cocoa market as cocoa transformed from a beverage to a solid form They invented the process of pressing cocoa to make cocoa butter and cocoa powder, thus making possible the manufacture of chocolate. The dominance of the Dutch industry in cocoa trading and these inventions laid the foundation for the Dutch cocoa grindings industry and established their presence in the world cocoa trade. Swiss candy maker Daniel Peter's invention of milk chocolate in the 1860s further increased the attraction for chocolate and the demand for cocoa beans.

In 1925 the world's first cocoa bean futures contract was introduced at the New York Cocoa Exchange, which eventually became part of the New York Board of Trade and then ICE. Options on cocoa futures began trading in 1986.

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Orange Juice Trading

Orange Juice Market Trading Defined and Explained

The orange juice market changed overnight when the process for making frozen concentrated orange juice (FCOJ) was invented in Florida in 1947. Unlike most commodities, orange juice futures are a relatively modern form of a basic agricultural market. While most of the emphasis for the orange juice futures trader has been on

Florida and its orange crop in the past, orange juice production in Brazil now has a strong influence on the FCOJ market.FCOJ Trade Prices & Orange Juice Rates

FCOJ futures and options on futures are traded electronically at the Intercontinental Exchange (ICE, formerly the New York Board of Trade).The contract for orange juice futures is for 15,000 pounds of orange juice solids (3% or less).Orange juice trading prices are quoted in cents and hundredths of a cent.One point equals $1.50, but the minimum fluctuation is 5/100 of a cent per pound, or $7.50 per contract.Contract months are January, March, May, July, September and November with at least two January months listed at all times.Orange Juice Trading Fundamentals

Investing in the orange juice futures and options market provides critical risk management tools to an industry at extra risk when the weather changes rather suddenly and dramatically. Frozen Concentrated Orange Juice is especially sensitive to weather conditions in Florida and Brazil during the hurricane and winter seasons, with the threat every year that one severe hurricane or one big freeze could damage or wipe out years of growth and development of orange tree groves.

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Orange Juice Trading Tips

Trading orange juice or FCOJ futures isn t really like the trading action depicted in the film, Trading Places, in the 1980s, but it is true that FCOJ futures trading can involve the exchange of a lot of money in a short period of time when weather conditions pose a potential threat to the orange groves in Florida. The impact of the status of the Florida crop on FCOJ prices may not be as great as it once was because of the expansion in the production and export of orange juice from Brazil, but FCOJ futures still rate as one of the more volatile commodities. Veteran traders often give a couple of pieces of advice:

Never be short FCOJ futures going into January.Never be short coffee futures going into July.That advice could extend into having call option protection going into those seasons and then, if there is a significant rally, put option protection as prices return to more normal levels if fear turns out to be greater than reality.

Some training in forecasting weather or having access to predictions from a good weather service might also be a good investment for the FCOJ trader, who not only needs to anticipate the extent of the effect of a weather development but also the degree that traders might have already worked the weather consequences into current orange juice futures prices.

Orange Juice Trading Information

Although a number of factors, such as a processing capacity, disease, and the strength of the U.S. dollar, all may affect the supply and pricing of orange juice, FCOJ is still widely regarded by traders as a true weather market. More than 98% of the U.S. orange juice supply traded on ICE comes from Florida, a geographic concentration that is unlike any other commodity and makes weather information from Florida critical to the FCOJ trader.

While frost and freezes and hurricanes may affect Florida production, dry weather and droughts may affect orange juice production in Brazil, which accounts for 80 percent of the world s frozen orange juice concentrate export market, including exports to the United States. Because of the inverse growing seasons for the United States and Brazil, their combined production makes the FCOJ market a year-round market. The United States and Brazil outpace all others in Orange juice production.

Orange Juice Trading Strategy

The volatility of FCOJ is what makes trading in this sector attractive to many. Orange juice futures can offer real price moves for the trader looking to cash in on short-term developments, especially those related to the weather in Florida. Orange juice prices will almost certainly soar as a result of U.S. hurricane warnings or impending cold winter. This sensitivity to weather factors combined with a competitive orange juice market makes the price of FCOJ extremely volatile. Because orange juice and FCOJ prices are highly correlated, FCOJ futures are an important risk-transfer tool for a citrus industry vulnerable to extreme price risk.

It can take as long as 15 years for an orange tree to reach maturity so any efforts to increase production require a long-term commitment, which can often be interrupted by the short-term developments. FCOJ traders placing stops outside of current trading ranges during the fall hurricane and winter freeze seasons may be able to catch these short-term moves.

Orange Juice Trading Supply

Florida and Brazil outpace all other areas in orange juice production so FCOJ traders should concentrate on news from those two areas. One measure of Florida s orange juice supply can be gleaned from the number and quality of citrus trees, a number published bi-annually by the Florida Agricultural Statistics Service, which breaks down trees by type and numbers producing fruit.

Orange Juice Trading Demand

The National Agricultural Statistics Service, Economic Research Service and Foreign Agriculture Service of the U.S. Department of Agriculture all provide information about

orange production, orange juice supply and demand and other details in the monthly crop production reports and updated supply/demand estimates as well as quarterly summaries of the crop situation. The orange crop production number in the Brazilian Association of Orange Juice Exporters (Abecitrus) is Brazil s primary source for FCOJ news and statistics for the country. October report and updates in the November report are often noteworthy for their effect on orange juice prices for the coming season.

Orange Juice Trading History

Florida has been known for its orange and other citrus production for many years, but it took a processing innovation in Florida in 1947 to make frozen concentrated orange juice a commodity on which a futures contract could be based. It took a few years for that market to develop before a predecessor to ICE introduced FCOJ futures, the newest traditional commodity futures market, in 1966. Options on FCOJ futures were added in 1985.

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Coffee Trading

Coffee Trading Defined and Explained

Coffee is the second most commonly traded commodity in the world (measured by monetary volume), trailing only crude oil as a source of foreign exchange to developing countries, according to the International Coffee Organization. While production and consumption of many commodities tend to rise and fall based on price, shifts in coffee supply and demand are not so prone to price changes as people continue to look for their morning cup of coffee at whatever the price is. An important distinction for coffee futures traders is that two different types of coffee are traded on the world's exchanges.Coffee Prices & Rates

Arabica coffee futures and options are traded in New York on the Intercontinental Exchange (ICE, formerly the New York Board of Trade).

The size of the Coffee "C" futures contract is 37,500 pounds.Coffee commodity trading is now done electronically.Coffee futures prices are quoted in cents per pound, and the minimum price fluctuation is 5/100 cent/pound, equivalent to $18.75 per contract.A 1-cent change in price equals $375.The coffee futures contract months are March, May, July, September and December. The contract prices physical delivery of exchange-grade green beans from one of 19 countries of origin in a licensed warehouse to one of several ports in the United States and Europe.Coffee Trading Fundamentals

Robusta coffee futures are traded in London on Euronext.liffe.

The size of this coffee futures contract is 10 metric tons.Coffee futures prices are quoted in U.S. dollars per metric ton with the minimum price movement $1 per ton or $10 for the contract.Contract delivery months are January, March, May, July, September and November with 10 delivery months available for trading.Other international exchanges that trade coffee futures include the Singapore Commodity Exchange (Robusta), the Commodities & Futures Exchange (BM&F) in Brazil (Arabica) and the Tokyo Grain Exchange (Arabica and Robusta).

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Coffee Trading Tips

Veteran traders will give you a couple of tips about trading related to weather:

Never be short orange juice going into January.Never be short coffee going into July.The reasoning is the same: the threat of winter freezes. In the case of coffee futures, a freeze or threat of a freeze in Brazil that could be severe enough to damage coffee trees and reduce coffee production, perhaps for several years, can have a substantial impact on prices because of the dominant role Brazil has in the world coffee market. Depending on the world coffee supply situation, some traders are reluctant to be short coffee after May, looking ahead to the Southern Hemisphere s winter season. However, this seasonal tendency is not real strong because other countries such as Mexico can fill in with coffee supplies.

Coffee Trading Information

Coffee futures traders should be aware that because coffee production occurs in relatively few countries, it is possible that coffee shipments might be controlled in an effort to boost coffee prices, such as has occurred in the past and similar to what has happened in crude oil and some other markets. Coffee futures prices have been relatively quiet for a number of years but are not immune to blowoff price explosions, as older price charts will reveal.

Coffee Trading Supply

A coffee tree can provide enough coffee beans to fill a one-pound can of ground coffee during each growing season. Coffee beans are the seeds of cherry-sized berries, the fruit of the coffee tree. It takes 3 to 5 years after planting a coffee tree before it can produce marketable coffee beans.

The bulk of world coffee production comes from the tropical highlands of the Western Hemisphere and in the low, hot areas of Africa and Asia. South and Central America produce the majority of coffee traded in world commerce. The world's major coffee producers are Brazil, Vietnam, Colombia and Indonesia. Brazil and Colombia produce mostly Arabica coffee and together account for more than 40 percent of world coffee production. Vietnam produces Robusta coffee, generally considered to be a lower quality type of coffee than Arabica.

The world produces about 120 to 140 million 60-kilogram bags of coffee per year (one 60-kilo bag equals 132.276 pounds). Coffee production can vary significantly from year to year, depending whether Arabica coffee trees are in the on-year or the off-year of their biennial production cycle. Simply comparing this year s output to last year s may be misleading for the U.S. coffee futures trader.

Coffee Trading Demand

The United States is the world s largest importer of coffee. Kraft, Nestl , Procter & Gamble and Sara Lee are the major roaster companies and account for purchases of about 50 percent of all the annual production of coffee. Demand for coffee is price inelastic: When coffee prices rise, people do not reduce their coffee consumption proportionally; when coffee prices fall, consumer demand for coffee does not proportionally increase to any great extent. Seasonally, U.S. coffee consumption tends to rise in the winter, which may lend support to coffee futures prices.

Coffee Trading History

The International Coffee Organization produces statistics on international coffee production and shipments and promotes coffee trading among nations. Based in London, the ICO consists of 55 coffee producing and consuming member countries and makes available a great deal of data and other information to coffee futures traders.

The Foreign Agricultural Service of the U.S. Department of Agriculture also offers a wealth of coffee information and statistics, including production data by country and for the world, import and export data, etc. The various exchanges that trade coffee futures also have lots of information.

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Sugar Trading

Sugar Market Trading Defined and Explained

Sugar is widely produced, traded and consumed around the world. Sugar is produced from either sugar cane or sugar beets in more than 120 countries and consumed in every

country. Sugar is used in everything from food to industrial applications. Because sugar is grown in so many countries, one of the themes that is more prominent in this marketplace than in most others is government involvement in protecting domestic producers by instigating tariffs and other trade restrictions that sugar futures traders must understand and take into account.World Sugar Prices & Rates

The contract size for #11 world raw sugar futures traded at IntercontinentalExchange (ICE, formerly the New York Board of Trade) is 112,000 pounds (50 long tons).

Raw sugar is any crystallized sugar product from a cane sugar production facility delivered in bulk.

The minimum price movement for these sugar futures is 1/100 cent per pound or the equivalent to $11.20 per contract.

Sugar futures contract months are March, May, July, and October.

Refined white sugar futures are traded in London at Euronext.liffe and call for delivery of white beet or cane crystal sugar or refined sugar of any origin that meets specific requirements.

The size of the white sugar futures contract is 50 metric tons.

Pricing is in U.S. dollars per metric ton with a minimum price fluctuation of 10 cents per metric ton or $5.

Contract delivery months are March, May, August, October and December with eight months available for trading.

Sugar Futures Trading Fundamentals

The value of physical sugar is influenced by its location. If a large buyer enters the market, potential sellers to that buyer would look for sugar located as close as possible to the destination to save on shipping costs. For example, in the case of raw sugar, normally the Far East region is well-supplied with raw sugar from Thailand, Australia and South Africa. But sometimes, with unexpectedly large crop failures, there could suddenly be a shortage of sugar from one of these origins, making shipping from another region economically feasible. So successful sugar trading may depend on knowledge of the shipping industry as much as normal supply-demand factors.

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Sugar Trading Fundamentals

The value of physical sugar is influenced by its location. If a large buyer enters the market, potential sellers to that buyer would look for sugar located as close as possible to the destination to save on shipping costs. For example, in the case of raw sugar, normally the Far East region is well-supplied with raw sugar from Thailand, Australia and South Africa. But sometimes, with unexpectedly large crop failures, there could suddenly be a shortage of sugar from one of these origins, making shipping from another region economically feasible. So successful sugar trading may depend on knowledge of the shipping industry as much as normal supply-demand factors.

Sugar Trading Tips

As is the case with many tropical commodities, the key country that sugar futures traders need to monitor is Brazil, the largest producer and exporter of sugar. Weather, political issues, the value of Brazils currency, the real, ethanol production and other factors all need to be monitored for their impact on world sugar prices and trade. Hurricanes in the Caribbean, which can devastate sugarcane crops in the United States, Cuba and elsewhere around the rim of the Gulf of Mexico if they strike at harvest time, can also send sugar futures prices higher.

Sugar traders must also continually assess whether raw sugar of a particular origin is in short or plentiful supply. The problem for buyers and sellers of physical sugar is that although they can hedge their cargoes of sugar on the futures market, they cannot hedge the premium or discount element in the price, such as tariffs or changes in shipping rates. Other factors apart from supply also have a bearing on the level of the premium or discount for trading sugar. The quality of the sugar may also be reflected in its value although there have been some occasions when strong demand for a lower quality has distorted this requirement.

Sugar Trading Information

With the widespread interest in sugar production and consumption, there are many sources of information about sugar supply-demand and trade on a local basis and internationally. As an active global market, many rules and standards for quality and pricing in the sugar processing industry are well-established and understood.

Among the sources of information for sugar futures traders are the following:Sugar Traders Association of the United Kingdom (STAUK), founded in 1952 by sugar trading companies based in London, provides information, sugar news and analysis of trends for the sugar market. The Sugar Information Service produces the website OnlineSugars.com, providing history and analysis of the international sugar trade. The Sugar Research Institute is Australias premier sugar processing research and development organization for client research and produces many Australian sugar industry reports.

The Foreign Agricultural Service of the U.S. Department of Agriculture provides a large amount of domestic and world production and price information for the sugar trading market as well as for all tropical markets.Sugar Trading Supply

Sugar is produced from two different crops in two kinds of growing conditions, sugarcane in tropical areas and sugar beets in more temperate zones. The refined sugar product of each is identical. Sugarcane accounts for about 70% of world sugar production with the largest producing countries being Brazil, India, China, and Thailand. The leading sugarcane producing states in the United States are Florida, Louisiana, Texas and Hawaii. The leading countries for sugar beet production are Europe, United States, China and Japan. The main sugar beet states in the United States are Minnesota, Idaho, North Dakota and Michigan.

Sugar Trading Demand

Sugar is consumed in every country, with an estimated 70 percent of sugar production worldwide consumed in the country that produces it, making sugar an important domestic crop economically as well as a major revenue source for sugar exporting countries. About 80 percent of world sugar import demand comes from developing countries. Sugar futures prices have ranged from 64 cents per pound in October of 1974 to less than 2 cents a pound in the late 1960s.

Sugar has been subject to increasing competition from alternative sweeteners such as high-fructose corn syrup used in soft drinks and elsewhere. On the other hand, sugar has been the major source for ethanol in Brazil since 2006, which has increased sugar demand and prices, a trend that is likely to continue as long as high crude oil prices continue to make ethanol produced from sugar economical. Brazil is both the largest exporter of sugar and the largest producer and user of ethanol.

Sugar Trading History

Sugar cane made its entry into the New World early. Columbus himself introduced the crop to Hispaniola on his second voyage in 1493. The first record of a substantial quantity of sugar was of three ships arriving in Spain loaded with sugar in 1525. By 1530, 12 ships arrived carrying 1,500 tons of sugar. The sugar trade exploded and by 1546, there were a total of 24 sugar mills on the island.

The #11 world raw sugar futures market has been in existence since 1914 and is the most actively traded softs commodity market.

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Gold Trading

Gold Trading Defined and Explained

Almost every exchange of any note around the globe has some type of gold investment, whether in stocks or futures or some other instrument based on a component of the gold market.

Two of the most important gold trading centers are in London and New York. The London gold market is one of the oldest in the world and is the largest market for physical gold. Since September 12, 1919, the London gold fix has been the gold price standard used in contract arrangements around the world. Today, the gold fixings take place at 10:30 a.m. and 3 p.m., providing the official gold price used by producers, consumers and central banks.

The major gold futures exchange for U.S. traders is the Comex division of the New York Mercantile Exchange (NYMEX), which began trading gold futures on Dec. 31, 1974, on the first day U.S. citizens were allowed to own gold after a ban of more than 40 years. Other important gold markets are located in Tokyo, Sydney, Hong Kong, Shanghei, Singapore, Dubai and Zurich. So at any time of the day or night a current gold price is being established somewhere.

Gold Market Prices & Rates

The size of the NYMEX gold futures contract is 100 troy ounces.Contract months are February, April, June, August, October and December.Gold futures prices are quoted in U.S. dollars per ounce ($1 equals $100 per contract), with a minimum price fluctuation of 10 cents ($10 per contract).Another venue for trading gold futures is NYSE Euronext, which purchased the metals complex including mini- and full-size gold futures contracts that were traded at the Chicago Board of Trade prior to the CBOTs merger into CME Group.Another medium to invest in gold is the StreetTracks Gold Shares exchange-traded fund introduced in 2004. Sponsored by a subsidiary of the World Gold Council, the shares are designed to track the price of gold and trade like a continuously offered security.Gold Trading Fundamentals

South Africa is the world's largest producer of gold, accounting for about 16 percent of annual world gold production, followed by the United States (12 percent), Australia (11 percent) and China (7 percent). In the United States, Nevada is the top gold producing state, followed by Alaska and California.

According to the National Mining Association, mined gold supply is dwarfed by the growing global gold demand. The best estimates indicate that the global market buys almost 5,000 metric tons of gold each year. Global gold demand exceeds global gold supply by approximately 60 percent annually, creating an ongoing structural shortage situation.

Although gold is consumed for various purposes, it is claimed that virtually all of the gold mined throughout history still exists today in one form or another. Gold jewelry, for example, is considered to be a store of value and an important way to hold gold. Whenever gold prices get high enough, gold recovery from scrap or from relatively minor uses such as electronic equipment keeps gold supplies from disappearing.

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Gold Trading Tips

While prices for many physical commodities tend to revolve around supply-demand data, gold needs to be treated more like a financial market that responds to fear and anxiety. Gold prices typically move higher in times of crisis and panic. A stock market crash, an unexpected war or terror attacks can lead to a buying frenzy in gold because traders view it as a safe haven and preferable to own instead of paper assets.

Gold prices usually move higher during periods of high inflation, which tend to bring on higher interest rates. Gold futures prices also have an inverse relationship with the price of the U.S. dollar, because gold and other key commodities like oil are priced in dollars. If the value of the dollar declines over time, the price of gold should rise.Gold Trading Information

Because of its role in world markets and economies, gold is the subject of many financial articles and presentations by the media, and many of the news events reported by the financial press have a bearing on the price of gold. Numerous newsletters and internet web sites advocate investments in gold and hard assets or investments in penny stock gold mining companies. Gold Trading Supply and Demand

In addition to data and information available from the exchanges and from government sources, a number of organizations offer materials related to gold production, consumption and other statistics and other resources that may interest the gold trader. Two of them are:

The National Mining Association, based in Washington, D.C., is a national trade organization of 325 corporations that represents the interests of all aspects of the mining industry including coal, metal and industrial mineral producers, mineral processors, equipment manufacturers, bulk transporters, etc. (www.nma.org)The World Gold Council, founded in 1987, is an organization formed and funded by the world's leading gold mining companies operating on six continents with the aim of stimulating and maximizing the demand for, and holding of, gold. It offers a number of resources on gold supply/demand and why, how and where to invest in gold.Gold Trading History

Gold trading has existed for centuries and has been a keystone for economies throughout history, continuing to have global financial impacts today. Gold has not only been a means of exchange but also is regarded as a store of value and an excellent hedge against inflation.

In addition to being a monetary commodity, gold has a number of uses in jewelry, dentistry, etc. and is also an important industrial commodity because it is an excellent conductor of electricity and is extremely resistant to corrosion, making it critically important in electronics and other high-tech applications.

Gold is one of those markets that provide a wide range of viable investment vehicles for almost any type of investor. In addition to the physical gold itself in the form of gold bullion or gold coins, investors can express their opinions about the outlook for gold prices in gold futures and options, stocks of companies involved in metals and mining including the gold mining penny stocks and gold exchange-traded funds.

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Silver Trading

Investing in the Silver Market

Silver has often been called the poor mans gold, taking a back seat to gold when traders looked for a safe-haven investment. Silver is considered a precious metal but not as rare as gold. While silver prices have always been far below the value placed on gold, prices of the two metals have generally tracked together as the factors that affect gold also tend to affect silver. Silver, however, has a wider range of uses and is priced for its industrial uses in electronics, photography, jewelry and elsewhere in addition to its financial role, increasing its significance for an investment portfolio.

Like gold, there are a number of vehicles for investing in silver in addition to silver futures and options. Those who choose to invest in physical silver can buy silver bullion, silver coins, silver medallions or silver certificates backed by silver in vaults.

Silver traders who prefer to express their interest in silver prices through stocks can invest in mining companies including penny stocks or in silver exchange-traded funds.

Silver Trading Information

Like gold, silver is traded at a number of exchanges around the world, including Sydney, Tokyo, Dubai and the worlds major silver futures exchange, the Comex division of the New York Mercantile Exchange (NYMEX).

The full-size NYMEX silver futures contract is 5,000 troy ounces of refined silver, not less than .999 fineness, in cast bars weighing 1,000 or 1,100 troy ounces each.

Contract months are the next two calendar months, any January, March, May and September within a 23-month period and any July and December falling within a 60-month period beginning with the current month.Silver Prices are quoted in dollars per ounce, with the minimum price fluctuation one-half cent per ounce or $25 per contract.Straddles or spreads are traded in tenths of a cent, equivalent to $5 per contract.NYMEX also trades a half-size miNY silver futures contract. However, activity has been limited and may not be liquid enough for active traders.

A report on silver warehouse stocks provides a daily amount of silver inventory on hand for possible delivery on futures contracts. A decrease in inventories can provide support for silver prices to move higher.

Another venue for trading silver futures is NYSE Euronext, which purchased the metals complex including mini- and full-size silver futures contracts that were traded at the Chicago Board of Trade prior to the CBOTs merger into CME Group.

Silver Trading Fundamentals

Newly mined metal provides most of the needed supply of silver, with much of it coming as a byproduct from mining for other metals. About 75 percent of the worlds annual supply of silver comes from mining production, with the remainder coming from government sales of silver stocks and from recycled scrap, including what is termed dishoarding as silver coins, jewelry and other silver products are melted down.

The top silver producing countries are Peru, Mexico, China, Chile and Australia.

On the demand side, about 54 percent of the worlds supply of silver is used in industrial applications, including a variety of uses in the electrical and electronic sector. Photographic demand continues to decrease, mostly due to lower consumer demand for color film because of further inroads from digital photography.

Jewelry fabrication continues to hold up well despite higher and more volatile silver prices, with noteworthy increases in silver demand for jewelry and silverware in China. See how VantagePoint Software can predict the silver market with up to 86% accuracy* - Get Free Silver Forecasts now.

Silver Trading Tips

If you trade silver, you want to watch gold and anything that influences gold prices as the two markets tend to move together. Particularly important for the prices of both precious metals are the government economic reports such as quarterly gross domestic product, monthly Consumer Price Index and Producer Price Index figures that measure the inflation rate and any other reports that reflect the countrys economic growth. Economic reports from other nations can also provide clues about silver demand.

Watch the spread between the gold and silver prices to move to one extreme or the other and expect it to come back to normal, buying silver and selling gold at the high end of the spread, for example.

Silver is an excellent commodity to have on hand if you are expecting high inflation and/or chaotic economic conditions because silvers lower values provide more flexibility for purchasing smaller items. For that reason, some people prefer to hold silver coins.

Be careful when holding silver futures overnight. In the volatile market conditions that have marked silver trading in recent years, the price of silver can make big moves from one day to the next. An unexpected crisis can occur at any time anywhere in the world, causing traders to look to the gold or silver markets to preserve their wealth. It is not uncommon for silver prices to open 20 or 30 cents higher or lower than the previous days close $1,000-$1,500 per contract and silver futures have been known to move $1 or even $2 intraday $5,000 to $10,000 per contract. Thats hardly a poor mans contract.Silver Trading Resources

There are multiple sources for finding news and information about purchasing silver as an investment or trading silver for profit opportunities. Most major newspapers and other financial news sources that cover metals report the pricing and sales of silver. Government sources, exchanges and brokerage firms all offer many resources for silver traders.

One of the major sources of information is The Silver Institute, an international association of miners, refiners, fabricators, and wholesalers of silver and silver products established in 1971 to promote the interests of silver worldwideSilver Trading History

Civilizations have been using silver going back 6,000 years, as silver deposits were on or near the earths surface, and the durable, malleable metal was used for jewelry and other artifacts that have been recovered. Mesopotamian merchants used silver as a form of exchange as early as 700 B.C., and the ancient Greek drachma and Roman denarius coins were made from silver. And then there is the English shilling "sterling," originally denoting a specific weight of silver, which has come to mean excellence.

Silver played an important role in the early days of the United States when Congress based the currency on the silver dollar and its fixed relationship to gold. Silver was used in U.S. coinage until being discontinued in 1965.

Silver gained a more important economic function as an industrial raw material at the beginning of the 20th century as new processes for photography, jewelry and electronics began to develop.

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Copper Trading

Investing in Copper

Copper is a primary industrial metal used mainly in construction (electrical and plumbing) and in equipment and appliances associated with building facilities. Copper is an excellent conductor of electricity and very resistant to corrosion so is a natural choice for various types of electrical and communications wiring and for piping water and gas.

For the copper trader who focuses on financial markets related to the economy, copper futures are often considered an accurate barometer of economic growth. Changes in the demand for copper suggest an economic expansion or contraction is under way and has earned copper a degree as a doctor of economics. Copper Traders can monitor copper futures prices to determine how to invest in stocks or other financial markets or may consider trading copper futures based on the copper market predictions.

Copper Trading Prices and Rates

As with gold, the two primary markets for copper trading are in New York and London. The London Metal Exchange (LME) is the worlds major non-ferrous base metals market and the center of physical copper trading. The Comex division of the New York Mercantile Exchange (NYMEX) is a major center for copper futures trading.

On the LME, copper is traded in 25-ton lots and quoted in U.S. dollars per ton.

On Comex, copper is traded in lots of 25,000 pounds and quoted in U.S. cents per pound.

Copper futures contracts on Comex are traded for all months.

The minimum price fluctuation is $0.0005 per pound or $12.50 per contract.

The Shanghei Exchange also trades copper in lots of 5 metric tons with prices quoted in Renminbi per metric ton.

Copper Trading Fundamentals

Copper is found in many parts of the world, usually in ore but sometimes in cubic crystal chunks ("native copper") such as near Lake Superior in Michigan. Ore is first mined, then put through a series of processes to refine and purify the copper.

The world produces about 15 million metric tons of copper annually, of which Chile accounts for about a third of all production. The United States is the second largest copper producer. Other large producers of copper include Peru, South Africa, Canada and Russia. Arizona accounts for about 65 percent of U.S. copper production although the largest U.S. copper mine is in Utah.

Scrap metal is also a significant source of copper supply as items that include copper are recycled for other uses.

The United States, Russia, and Japan are the three largest consumers of copper with growing demand from China. In the United States, building construction is the largest end-use market for copper products, accounting for a little less than half of total U.S. copper consumption. Electrical and electronic products account for nearly a fourth of U.S. copper consumption with transportation equipment, industrial machinery and equipment and consumer and general products each taking about 10 percent of the copper supply.See how VantagePoint Software can predict the Copper Trading market with up to 86% accuracy* - Get Free Copper Market Predictions now.

Copper Trading Background

Copper has been an essential material for mankind since pre-historic times even an age or stages of human history is named for a copper alloy, bronze. Discoveries and inventions in the late 18th and early 19th centuries by Ampere, Faraday and Ohm names recognized today in electrical terminology brought copper into a new era as researchers discovered coppers excellent electrical conducting and heat transfer characteristics that played a key role in launching the Industrial Revolution.

Copper trading continues to be an important foundation for manufacturers and traders alike. In the last 100 years, industrial demand for refined copper has increased twenty fold as more developed regions of the world use copper as an important component of their infrastructures.

Copper is also well-known as the outer skin of the Statue of Liberty, which provides a good showcase of coppers ability to withstand years of biting sea winds, driving rains and beating sun.

Copper Trading Resources

Copper trading is covered in all major financial newspapers and publications, and copper traders have plenty of industry-related websites from which they can learn about copper production/consumption historically and currently. Among these resources are:

American Copper Council, www.americancopper.org, a trade association representing all segments of the copper industry including producers, scrap dealers, brass and wire mills, fabricators, consumers, merchants and brokers. Incorporated in 1975, it has 120 member companies and focuses on education.International Wrought Copper Council, www.coppercouncil.org, a trade association for the copper fabricating industry founded in 1953 and including members worldwide.International Copper Association, www.copperinfo.com, an association of 38 leading copper producers formed in 1989 to coordinate and improve the effectiveness of the

international market development, research, and technology activities of the copper industry.Cover Development Association, www.copper.org, affiliate of the International Copper Association.Copper News, www.coppernews.com, part of the World News Network.A major report for Comex copper futures traders is Copper - High Grade Warehouse Stocks, which indicates whether copper supplies for possible delivery on the copper futures contract are increasing or decreasing.

Copper Trading Tips

On the copper supply side, the key area to watch is Chile and, to a lesser extent, Peru and South Africa, where labor strikes, shipping problems and political unrest can disrupt mining operations and the production of copper.

On the copper demand side, the rate of new homes under construction, housing permits and any other reports related to housing as well as general commercial construction data are key factors for copper futures prices. U.S. traders may focus on U.S. housing statistics, but copper traders also should be watching reports for developing areas such as China, which has become a major user of copper and accounts for an increasing amount of demand for copper.

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Platinum Trading

Investing in the Platinum Market

Platinum is the principal metal of the six-metal group that bears its name; the other platinum group metals (PGMs) are palladium, rhodium, ruthenium, osmium, and iridium. All possess unique chemical and physical qualities that make them vital industrial materials.

Platinum and palladium are the most widely used of the six platinum group metals, especially valued for their catalytic functions, their conductivity, and their resistance to corrosion. They are essential in key manufacturing processes in the automobile, chemical, petroleum refining, pharmaceutical, and electronics industries. On a relative volume of the amount mined on an annual basis, platinum has more industrial uses than gold and silver combined.

Platinum is also used in jewelry, because its resistance to wear and tarnishing are well-suited for fine jewelry. If silver is the poor mans gold, then platinum is the rich mans gold it is sometimes called white gold. Platinum is the rarest of all the precious metals, 16 times more rare than gold and 100 times more rare than silver. Coins and medallions

made of platinum, though more expensive, provide another way to invest in this precious metal.

Platinum Trading Prices & Rates

The New York Mercantile Exchange (NYMEX) is the world's premiere exchange for trading platinum futures and options.

The size of the NYMEX platinum futures contract is 50 troy ounces.Trading is conducted over 15 months beginning with the current month and the next two consecutive months and then the quarterly cycle of January, April, July, and October.Platinum futures and options are priced in dollars per troy ounce with a minimum price fluctuation of $0.10 per troy ounce or $5 per contract.The maximum daily price limit is $25 per troy ounce ($1,250 per contract) except for the current delivery month, which has no daily price limit.Platinum options strike price intervals are in increments of $10 per troy ounce. Exchange of Futures for Physicals (EFPs) may be used to either initiate or liquidate a platinum futures position.Tips for Trading Platinum

Platinum prices are sensitive to shifts in the U.S. economy. Seasonally, platinum prices tend to increase during the first quarter of the year as industrial production tends to be strong during February and March. Then, platinum prices typically decline during the summer as industrial production generally slows and easier transportation makes supply more readily available. Prices also tend to weaken in August/September as the biggest rush of auto production, the leading industrial consumer of platinum, is completed for the new model year.

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Platinum Trading Supply

Annual production of platinum is only about 118 tons, or only 6% (by weight) of the western worlds annual gold production and less than 1% (by weight) of the world's annual silver production. To put the supply of platinum into perspective, more than twice as much steel is poured each day in the United States than the amount of platinum produced in the world each year.

Platinum is among the world's scarcest metals as new mine production totals only about 5 million troy ounces a year compared to about 80 million ounces for gold and about 550 million ounces for silver. Platinum occurs as a native alloy in placer deposits or, more commonly, in lode deposits associated with nickel and copper. Supplies of platinum are concentrated in South Africa, which accounts for approximately 80% of world supply; Russia, 11%; and North America, 6%.

Unlike gold and silver, there are no large above-ground stocks of platinum to fill the gap against significant supply disruptions in fact, probably less than a years supply in reserves. About eight tons of raw ore must be mined to produce just one pure ounce of platinum, and it takes 6-9 months to go from extraction to processing. With labor unrest/strikes and shortages of electrical power in South Africa interrupting mining output and with uncertainties about the flow of supplies from Russia, platinum remains vulnerable to sudden supply and price shifts.

Platinum Trading Demand

Jewelry creates the largest demand for platinum, accounting for a little more than half of annual platinum consumption, with Japan accounting for about a half of the platinum demand for jewelry. Automotive catalytic converters consume about 30% of the platinum supply and chemical and petroleum refining catalysts, 13%. The computer industry and other high-tech electronic applications account for about 7% of consumption because platinum is an excellent conductor of electricity, does not corrode, and has a low reactivity with other metals.

Gasoline, hard disk drives, anti-cancer drugs, fiber-optic cables, LCD displays, eyeglasses, fertilizers, explosives, paints and pacemakers all rely on platinum. Platinum is also the key catalyst used in fuel cells. It has been estimated that 20% of all goods manufactured today either contain platinum or is produced using equipment containing platinum.

Demand for platinum in high-technology applications is soaring due to its unique properties: It is virtually impervious to corrosion, has a melting point in alloy of 3,215 degrees Fahrenheit, is a powerful catalyzing agent and is highly conductive.

Platinum Trading Background

The first European reference to platinum appears in 1557 in the writings of the Italian humanist Julius Caesar Scaliger (1484-1558) as a description of a mysterious metal found in Central American mines between Panama and Mexico. Spanish conquistadors had discovered platinum when they were panning for gold in the Choco region of todays Colombia. Because platinum interfered with gold panning, it was considered a nuisance and discarded as worthless.

However, in 1751 a Swedish assayer, Scheffer, successfully melted and worked the substance that had stymied the conquistadors, and by 1780, French glass workers were using platinum to make crucibles of glass because platinum did not melt at the extreme heat needed for making glass. Platinum's resistance to heat, corrosion, and strength made it an important industrial metal.

When jewelers were able to melt platinum in the 19th century, "white gold" began to replace silver in jewelry. The lustrous white color of platinum better accentuates

diamonds, and the bands can be much smaller as platinum is more than 100 times stronger than silver.

Platinum Trading Resources

Platinum traders may not have the organizations or associations on which they can rely for information, but exchanges and brokerage firms have resource materials on platinum and palladium. Platinum prices are covered by all major publications, and sources for the automobile or jewelry industries also have information about the use of platinum in their businesses.

Those interested in investing in platinum with a wedding ring or other jewelry may want to consult Platinum Guild International (www.platinumguild.com) for tips about this aspect of platinum.

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Palladium Trading

Investing in Palladium

Platinum and palladium are the most widely used of the six platinum group metals (PGMs), which also includes rhodium, ruthenium, osmium, and iridium. They are especially valued for their catalytic functions, their conductivity, and their resistance to corrosion. They are essential in key manufacturing processes in the automobile, chemical, petroleum refining, pharmaceutical, and electronics industries.

Many of the comments about platinum also apply to palladium. However, palladium does not have as high a profile as gold or platinum, and palladium prices are considerably lower than gold or platinum, which may give it a competitive advantage in some cases. Palladium Prices & Rates

As with the other precious metals, the New York Mercantile Exchange (NYMEX) is the world's premiere exchange dealing in palladium and platinum futures contracts.

The size of the palladium futures contract is 100 troy ounces. Palladium futures prices are quoted in U.S. dollars and cents with a minimum price fluctuation of $0.05 per troy ounce or $5 per contract.Trading is conducted over 15 months, beginning with the current month and the next two consecutive months before moving into the quarterly cycle of March, June, September, and December.Palladium Traders have another possible way to take advantage of fluctuations in palladium prices is with a London exchange-traded fund (PHPD) or with another London-traded ETF (PHPP) that provides exposure to all four metals, gold, silver, platinum and palladium.

Palladium Trading Supply

Palladium is mined with platinum and resembles it in many respects, but there are some important differences between the two metals. Palladium is also produced as a byproduct of nickel mining. Russia supplies about 65% of the worlds production, South Africa produces most of the rest, with North America providing about 8%. Annual palladium production runs approximately 8 million ounces.

Russia has generally kept the market well supplied with palladium. However, the flow of palladium supplies has been erratic at times, adding further constraints into the supply chain. Some believe that Russian supplies are starting to run out, others think that officials may be controlling the flow to keep supplies tight so that a sense of scarcity will help push palladium prices higher. In any case, with the government keeping a tight rein on supplies, Russia needs to be considered a rather fickle palladium supplier.

In South Africa, labor issues and problems with generating sufficient electrical power to operate mining facilities at capacity can have an impact on palladium production. With a tight supply-demand balance, disruptions in palladium output or shipments can have price consequences, sometimes occurring as sharp, brief spikes based on concerns that the flow of palladium could be curtailed.

Palladium Trading Tip

The most obvious tip for palladium traders is to watch platinum fundamentals and price movements closely. Whatever affects platinum is likely to also have an effect on palladium prices.

Perhaps a better strategy is to follow prices of both metals, as well as gold, and trade spread relationships. A factor that sends precious metals prices higher is likely to cause a bigger move in platinum than in palladium prices. When the price gap between the two widens to high levels, sell platinum and buy palladium; when the price spread shrinks to low levels, buy platinum and sell palladium, expecting a breakout higher in metals prices to send platinum prices on a bigger run.

Palladium Trading Demand

Automotive catalytic converters are the largest palladium consuming sector, accounting for nearly two-thirds of palladium consumption. Electronic equipment accounts for about 20% of usage; dental alloys, 12%; and jewelry, 4%.

In addition to supply uncertainties, another fundamental issue that could support higher palladium prices is the runup to record high prices for platinum and gold. The record platinum prices make palladium an attractive option for the auto catalyst market and even the jewelry market. With more cars being produced in emerging markets such as China and India, demand for palladium in catalytic converters is likely to increase. With

palladium priced at about a third the price of platinum, its not hard to figure out which metal auto manufacturers would prefer to use if they have a choice.

Catalytic converters using palladium are more effective on diesel fuel engines. As demand for diesel fuel automobiles grows in Europe, demand for palladium should increase and demand for platinum from European automobile manufacturers should decrease. Of course, there are constantly rumors and reports that some new type of catalytic converter will be produced some day, and these can spark price moves in platinum and palladium, depending on how traders perceive the latest rumor, if true, might affect demand.