Commodities are a crucial part of our daily life. By definition, a commodity is an essential good, especially in commerce, that can be interchanged with other goods of the same type. They drive the market up to a more considerable extent.
Investors rely on commodities because they want to diversify their portfolios beyond traditional securities. In contrast, others rely on commodities during a period of market volatility.
Why commodities are risky investment propositions?
However, commodities, despite their advantages, are also risky investment propositions due to the market in terms of supply and demand. In a situation whereby there is a devastating pandemic or war, even in some scenarios of weather patterns and disasters both natural or manmade, commodities are mostly affected by uncertainties that you can find difficult, almost impossible, to predict.
Research has shown that the ongoing pandemic has wreaked chaos across global commodity markets, trade and supply and demand dynamics have been disrupted, and this creates a major uncertainty over the pace of recovery. For starters, this is no time to jump into the commodity markets.
However, Suppose you are an investor, willing to trade and participate in commodity markets in situations like these. In that case, you will need this guide to show you some of the commodities you can trade with. Enjoy!
Top 12 Commodities to Trade With Post Collapse (Pandemic or War)
There are different types of commodities you can trade with post-collapse such as pandemics or war. We recommend you to be smart when trading some of these commodities due to uncertainties that keep on developing. The commodities to be outlined below will be grouped based on the type of commodities.
Generally, there are four types of commodities. Here is all you need to know about the top 12 commodities to trade within a post-pandemic or war.
Metals – Gold, Silver, Copper, Iron
For metals, for example, Gold is often regarded as a safe haven asset that is boosted by risk-off sentiment among investors, and they do not go stale.
Political Risks
One of the fundamental drivers that work to increase the attractiveness of holding Gold is political risks.
Geopolitical Tensions
You could invest in Gold in a post-pandemic due to the rising geopolitical tensions, and the risk of the second wave of a pandemic, which might lead to a lockdown.
Low Yields on Bonds
Even low yields on bonds as a result of central banks keeping monetary policies accommodative and the adoption of quantitative easing by governments, all of which will motivate investment into Gold. Also, gold prices would stabilize as it attains equilibrium with risks.
Economic Forces
There is also the option for economic forces to support gold prices.
In terms of mining and metal production, for instance, copper and iron might seem to be declining at first. Still, after some time, mining activities will increase because there will be an end to operational disruptions with no more hindrances expected.
Energy – Crude Oil and Natural Gas
Unlike metals, you cannot merely store oil and natural gas in storage tanks during a pandemic or war.
Futures Contracts
Therefore, investing in these energy commodities can only be done by buying the front-month futures contract. You buy short-term futures contracts and roll them over as time goes on.
Short-Term Trading
However, the fall in the price of oil and natural gas that might have occurred probably as a result of differences in prices during a pandemic, for instance, will only make oil and natural gas suitable for short-term trading or investing rather than long-term investing.
Economic Downturns
Also, suppose you want to trade in crude oil and natural gas. In that case, you should be aware of economic downturns, and new technological advancements in alternative energy sources such as biofuel that can replace crude oil and natural gas as a primary source of energy.
This is because they have a huge impact on the market prices for energy commodities
Livestock / Meat Commodities – Pork Bellies, Live Cattles, and Lean Hogs
Pork Bellies
One of the most volatile commodities traded on the world market is Pork bellies.
What are Pork Bellies?
Pork bellies come from the underpart of hogs, cut into sections, and flash frozen. They serve as the basis of bacon products.
Trading of pork bellies is not for the faint-minded, you can trade tons of tons of pork bellies at any given time. Pork belly futures do rise and fall depending on demand for bacon. However, pork bellies future are known to rise in value in cold winter months when they are consumed a lot.
Live Cattle
In the same vein, live cattle predominantly form the world’s beef supply. They can be traded daily on the work markets during a post-collapse.
Live cattle are any cattle from calf to about 600 – 800 pounds which makes them distinctive from feeder cattle. Prices of beef rise or fall significantly depending on the demand from traders such as meat manufacturers, grocery chains, restaurant chains, and so on.
Lean Hogs
Another livestock that can be traded is the lean hogs. It is usually produced in the midwest where it can be raised for six months before being slaughtered and made available on the world markets. You should also know that the cost of hog feed influences the supply of pork.
These are one of the commodities you could trade with during a pandemic or war. There might be a disruption in meat processing plants during a pandemic. Still, there is a huge tendency that they will recover modestly with time. This is because there will be a greater demand for vegetable oils, dairy products, and sugar to meet the needs of the population
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Agriculture – Soybeans, Rubber, Palm Oil
Soybeans
Agricultural commodities such as soybeans are one of the most competitively traded commodities. They can be volatile during the summer months or any weather-related changes. Trading and prices of soybeans fall due to floods or droughts.
According to feedstrategy.com, using the current pandemic as an example, Sutter said
“Soybean futures have spent the last few months hovering around 10-year lows. But in the last week or so, we’ve seen prices rally about 30 cents per bushel on the realization that Brazil is running out of supply”
Therefore, you can benefit from rising prices in cases of population growth combined with limited supply.
Rubber
Another agricultural commodity you can trade is Rubber. Rubber is used in all spheres of life. Due to its versatility, it is one of the hottest commodities to trade in world markets.
Where is rubber produced?
It is produced primarily in countries like Thailand, India, Malaysia, Indonesia, and China.
Is there great demand for rubber?
Due to the crippled economy during pandemics or war, it is expected that there should be a sharp uptick in demand for Rubber because of limited supply in world markets. Hence, there is a rising prospect in the prices of Rubber.
As the economy recovers from a post-collapse, there will be an increase in the price of Rubber from global demand.
Palm Oil
Furthermore, palm oil is also another top commodity you can trade. It is the world’s second most widely produced edible oil in the world, according to BusinessStandard.com.
Use
- It is one of the essential ingredients in basic household products like soap.
- It has also been implicated to be used as biofuel.
It can remain a highly volatile commodity after a pandemic or war due to its high demand and limited supply.
Other top commodities include
- cocoa
- wool
- sugar
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Conclusion
Now that you know some top commodities to trade with post-collapse, including pandemics or war, we strongly recommend that you do more research concerning these commodities and some other commodities not listed.
This is because of the high uncertainties that keep on arising in a situation like a post-collapse. We hope you found this information useful.
Comment down below if you want to know about other commodities.
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