Why commodities are still important

Why commodities are still important

The relationship between currencies and the goods on which their values are based on may seem abstract, but they are very real. The commodities on which they are based are still very relevant today. These commodities could be natural gas, oil, gold, and various precious metals.


Most people around the world have some awareness of the importance that goods play in the economy. Thus, the constant vigilance of the media on the state of various trades goods does have a valid basis.


The various world events can have a huge effect on the state of the valuations of these various commodities. One of the commodities which has overwhelming importance for the health of numerous world economies is of course oil. So much so, that some countries are in fact wholly reliant on oil to keep their economies healthy. For example, a rather recent attack on Saudi Arabia’s Abqaiq oil facilities caused interest rates to skyrocket in the oil market. These attacks may have worried investors as to how Saudi Arabia will be able to transfer their supplies to other markets. Saudi Arabia, as well as the Strait of Hormuz, are both vitally important to keep one’s eye on to evaluate the state of the oil market.

Types of agricultural commodities

While there may be an innumerable number of commodities to evaluate, we can order them into three different categories. These can be agricultural goods, metals, and energy-based goods. Agricultural commodities are the most basic necessity for any culture, and any market will still require them under any condition.


The one we shall discuss first shall be agricultural. Agricultural goods can be divided into five major categories: cereal grains, oilseeds, dairy, meat, other soft commodities, and the remaining miscellaneous agricultural commodities.


Cereal grains can include wheat, corn, oats, among others. Farmers grow oilseeds to ensure high oil content. They also utilize the remaining oil meal after they extract the main product. This could be palm oil, soybean oil, canola oil, etc. Following this, we have various dairy products, such as milk, butter, and cheese. Dairy products are widely consumed, although the market varies somewhat from country to country. The value of the next commodity is self-evident, being meat, which is a valued food item across the world. Other soft commodities could be cocoa or sugar for example. The remaining commodities could comprise of wool, rubber, and generally harder to categorise goods.


All of these six categories have their place in the world-wide agricultural market, and will continue to do so regardless of technological innovations.



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