Commodities are basically raw materials that make up the goods we manufacture, transport or consume.

A commodity market is one which facilitates trading in various commodities. This market has had tremendous economic impact on nations and people, both historically and currently. Shortages on critical commodities have sparked wars throughout history (not to forget when Japan ventured into foreign lands to secure oil and rubber we faced World War II), while oversupply can have a devastating impact on a region by devaluing the prices of core commodities.

The four categories of trading commodities include:

• Energy ( such as crude oil, heating oil, natural gas and gasoline)
• Metals (such as gold, silver, platinum and copper)
• Livestock and Meat (such as lean hogs, pork bellies, live cattle and feeder cattle)
• Agricultural (such as corn, soybeans, wheat, rice, cocoa, coffee, cotton and sugar)

There are about 30 actively traded commodities that one can choose from the U.S. futures exchanges. Naturally, the new commodity traders wonder about the top notch options when it comes to choosing commodities for trade.

To put it very simply, the factors to consider when choosing the best commodities to trade are market liquidity as well as fundamental trends.

However, for starters, it is best to stick to commodities where one already possesses some basic industry knowledge. Consciously or not, all of us have some reasonable knowledge of at least one commodity through some type of work experience. For instance, people in the candy or sweets business watch the price of sugar closely, whereas, jewelers monitor the prices of precious metals on a daily basis and they know what is hot and trending.

With some basic knowledge, one may move on to select trading of commodities that fall within one’s risk parameters. It is important to realize that not all commodities have equal risk. That is why some fundamental ‘trend-trading’ is required to do the risk analysis.

A commodity market may be a spot or a derivatives market. In spot market, commodities are bought and sold for immediate delivery, whereas in derivatives market, various financial instruments based on commodities are traded. These financial instruments called ‘futures’ are traded in exchanges. To find out the volatility of each commodity, one should check the futures margin of each commodity. The margin on a futures contract depends on the amount of risk with each commodity (the daily price swings of futures contracts), so make sure the amount of risk is suitable for you when you pick a commodity to trade. In order to do that, both fundamental and technical trending analysis techniques are required. For example, a trader who is expecting a long term rise in prices of corn futures will still want use tools such as Candlestick pattern formations to watch daily futures price movement in order to get the best purchase price even though he or she may be holding futures contracts for months or years. For the new comer in commodity trading, the best commodities to trade may be those with less market volatility and, therefore, less risk of substantial loss.

Some of the top commodities can quickly become risky investment propositions because they can be affected by eventualities that are difficult, if not impossible, to predict and therefore prone to wild swings for no apparent reason. Unusual weather patterns, natural disasters, epidemics and man-made disasters are some of the factors to consider while investing in grains and livestock. For example, a severe winter on the North American Great Plains may result in the deaths of many cattle causing the price of beef to soar up. An astute trader may see a weather map of a severe storm passing over Nebraska and Iowa and anticipate a drop in June live cattle futures. Similarly an unexpected drought or flood can result in the reduced market supply of grains. It is therefore essential to predict when large price movements do usually occur so that one can allocate the liquid assets in the market accordingly.

Some professional traders like to concentrate on one or just a few commodities to trade. There is sound logic behind this approach as one intimately gets to understand all the little quirks of a commodity that many traders miss. However, just as there is reason for diversifiying a stock portfolio, there can be reasons to diversify when trading futures on commodities. Although the possible return on investment in just trading interest rates or gold futures may be inviting, hedging (making an investment to reduce the risk of adverse price movements in an asset)in the form of trading a balanced portfolio of commodities may be safer and more profitable in the longer run.

Thus, the best commodities to trade are the ones the trader knows the most about and is willing to monitor closely enough to anticipate the market. For interest rates and currencies, the trader will need insight into economics and politics as well as the banking systems of the countries involved. Trading oil futures, energy credits or natural gas futures require a sense of the economy as a recession can decrease demand substantially. Similarly, trading precious metals futures also has a lot to do with the economy and monetary policy. Markets and trading conditions are constantly changing, hence, commodities offering good trading opportunities one year may not perform likewise in the next.

While trading commodities across nations, some of the important factors to consider are the means of transportation, procuring border clearances, intermediate storages where required and distribution of goods. Depending on the nature and volume of commodities, the traders need to opt for the best suitable means available.

Compared to the air freight transport, the international ground transportation (trucking and railway) is a less expensive option and can be used when there is no immediate rush on an international shipment. The rail system also allows for containers to move to facilities where they can be moved to other forms of transportation for their final destination. Although ocean transit is the most cost efficient option when the traders are looking at large cargo shipments, it is important to remember that the freight delivery timelines may vary according to several factors like routes and weather conditions. To move cargo across multiple borders, traders can avoid complications by choosing the Inland Freight or the Intermodal Transportation Service.

To get headache-free shipments around the world, across multiple borders, with warehousing and distribution on either end, one needs full global supply chain management services. Therefore resorting to logistics companies like the DRT International.Inc makes complete sense. They provide customized supply chain management solutions for clients across many different industries with guaranteed information, pricing and accuracy in deliveries.

While it is true that supply chain management does encompass the purchasing and procurement functions, logistics companies like ShopUST have taken that extra step too so as to further reduce the trading difficulties(such as worrying about the quality of goods or vendor-reliability) for global clients across various industries.

Such one-stop solutions ultimately abet globalization by making the commodity trade more profitable, efficient and satisfactory experience for the traders while allowing the international demand-supply chain to thrive effectively.