Investing in Agricultural Products - dummies

Investing in Agricultural Products

Food is the most essential element of human life, and the production of food presents solid investment opportunities. You can invest in the agricultural sector, in everything from coffee and orange juice to cattle and soybeans.

  • Coffee: Coffee is the second most widely produced commodity in the world, in terms of physical volume, behind only crude oil. Folks just seem to love a good cup of coffee, and this provides good investment opportunities.

  • Cocoa: Cocoa production, which is dominated by a handful of countries, is a major agricultural commodity, primarily because it is used to create chocolate.

  • Sugar #11: Sugar is a popular food sweetener and it can be a sweet investment as well. Sugar #11 represents a futures contract for global sugar.

  • Sugar #14: Sugar #14 is specific to the United States and it is a widely traded commodity.

  • Frozen Concentrated Orange Juice — Type A: FCOJ-A, for short, is the benchmark for North American orange juice prices, as it’s grown in the hemisphere’s two largest regions: Florida and Brazil.

  • Frozen Concentrated Orange Juice — Type B: FCOJ-B, like FCOJ-A, is a widely traded contract that represents global orange juice prices. This contract gives you exposure to orange juice activity on a world scale.

  • Corn: Corn’s use for culinary purposes is perhaps unrivaled by any other grain, which makes this a potentially lucrative investment.

  • Wheat: According to archaeological evidence, wheat is one of the first agricultural products grown by man. It is an essential staple of human life and makes for a great investment.

  • Soybeans: Soybeans have many applications, including as feedstock and for cooking purposes. The soybean market is a large market and presents some good investment opportunities.

  • Soybean oil: Soybean oil, also known as vegetable oil, is derived from the actual soybeans. It’s used for cooking purposes and has become popular in recent years due to the health-conscious dietary movement.

  • Soybean meal: Soybean meal is another derivative of soybeans that’s used as feedstock for poultry and cattle. It may not sound sexy, but it can be a good investment.

  • Live cattle: For those involved in agriculture, using the live cattle futures contract to hedge against price volatility is a good idea.

  • Feeder cattle: While the live cattle contract tracks adult cows, the feeder cattle contract is used to hedge against the risk associated with growing calves. This area is not widely followed in the markets, but it’s important to figure out how this market works.

  • Lean hogs: They may not be the sexiest commodity out there, but lean hogs are an essential commodity, which makes them a good trading target.

  • Frozen pork bellies: Frozen pork bellies are essentially nothing more than good old bacon. This is a cyclical industry subject to wild price swings, which provides unique arbitrage trading opportunities.