Learn All About Agricultural Commodities and Market Trends

Risk Warning: Your Capital is at Risk.

On this page, we discuss different kinds of agricultural commodities, their relationship to the global economy, and the top agricultural commodity-producing countries in the world.

What Are Agricultural Commodities?

Agricultural commodities are staple crops and animals produced or raised on farms or plantations.

Most agricultural commodities such as grains, livestock, and dairy provide a source of food for people and animals across the globe.

Main Uses Of Agricultural Commodities

However, some agricultural commodities have purely industrial applications. The building and furniture industries use lumber from trees, while manufacturers in several sectors use latex from the rubber tree.

Wool from sheep provides the fabric for the clothing industry and lanolin for skin- and hair-care products.

Some agricultural commodities serve as both a source of food and an industrial ingredient. Both humans and animals consume corn, but the commodity is also an important ingredient in fuel production.

Similarly, humans eat the beef of cows, while a variety of industries use beef hide, fats, and bones to create products.

Why Are Agricultural Commodities Important?

Virtually every living being on the planet depends on the agricultural industry in one way or another.

We eat the grains, fruits, vegetables, and livestock that farmers produce; build the frames of our houses from lumber; make clothes from cotton and wool; and ride in cars with tires made from rubber.

Also, over 1.3 billion people – nearly 20% of the global population – work in farming. In some regions of the world, such as South Asia and Sub-Saharan Africa, farming employs more people than any other industry.

The global impact of the agricultural industry is enormous. According to the Food and Agricultural Organization of the United Nations, the economic value of the agriculture industry, in constant 2010 dollars, is more than $3 trillion.

With the world population expected to climb from 7.5 billion to 11.8 billion by 2100, agricultural commodities are likely to play an even bigger role in the decades ahead.

What Are the Different Agricultural Commodities?

Agricultural commodities fall into six categories:

1. Cereal Grains
2. Oilseeds
3. Meat
4. Dairy
5. Other Soft Commodities
6. Miscellaneous Agricultural Commodities

Cereal Grains: A Primary Food Source

Farmers grow these commodities as:

• Food source for humans
• Food source for animals
• Feedstock for fuels (in some cases)

The most common grain commodities include the following:

• Wheat
• Corn
• Oats
• Barley
• Rough Rice

Grain commodities often serve similar purposes. For example, corn, oats, and barley all function as food sources for livestock. Depending on price, farmers will choose one grain over the other.

As a result, most grain commodities have a strong price relationship with one another. Traders monitor the spread between grain prices to determine the relative values of one grain versus another.

Oilseeds: What Remains After The Oil?

These commodities resist easy classification since they serve multiple purposes. Farmers grow them for (a) the high oil content in their seeds and (b) the meal that remains after the oil is extracted:

• Canola
• Cotton
• Palm Oil
• Soybeans

In the case of cotton, its plant fibers have an important market in the clothing and houseware industries.

Because farmers use the meal from these crops in animal feed, oilseeds often have a strong price relationship with cereal grains.

Meat: A Food Source

Meat commodities include (a) live animals raised for meat, hide, organs, bones, and hooves and (b) cuts of meat produced during the butchering of animals:

• Feeder Cattle
• Live Cattle
• Lean Hogs
• Pork Bellies

Dairy: Post-19th Century Food Products

Dairy commodities include milk, butter, whey, and cheese. Markets for these commodities date back to the 19th century when traders organized the Chicago Butter and Egg Board.

Today these products trade on the Chicago Mercantile Exchange (CME).

Other Soft Commodities

Soft commodities refer to commodities that are farmed rather than mined. However, most commodity traders classify cereal grains, oilseeds, dairy, and meat separately.

The remaining soft commodities all have developed and liquid global markets:

• Cocoa
• Coffee
• Frozen Concentrated Orange Juice (FCOJ)
• Sugar

Miscellaneous Agricultural Commodities

Some commodities have well-developed global markets, but don’t fit easily into the above categories:

• Lumber
• Rubber
• Wool

Here’s a summary of agricultural commodities and what exchanges they are traded on:

*Legend for Primary Uses in the table above:

• FA = Food source for animals
• FP = Food or beverage source for people
• FF = Feedstock for fuel production
• OL = Food and/or industrial oil or lubricant
• IU = Industrial uses

What Key Global Trends Impact Agriculture?

Several long-term trends could create trading opportunities in agriculture over the next two decades:

1. Population Growth
2. Agricultural Productivity
3. Technology and Big Data
4. Demand for Meat in China
5. Global Warming

Population Growth

By 2040, the world’s population is expected to exceed 9 billion. Demographers forecast that three-quarters of the world will reside in Asia or Africa at this time.

Not only will the population increase, but people will be richer. Most analysts agree that the greatest wealth gains will be in the developing world where people will migrate from rural areas into cities.

Wealthier global citizens will mean more demand for agricultural products.

These trends could place strains on agricultural resources. Innovations in irrigation, biogenetics, and land usage are among the many advances that will be needed to help feed a growing population.

These innovations could produce new trading opportunities.

Agricultural Productivity

Emerging market economies have been growing at a much faster pace than developed economies over the last decade, and this trend is likely to continue.

Seven countries – Brazil, China, India, Indonesia, Mexico, Russia, and Turkey – accounted for 24% of world economic output between 2010 and 2016.

These countries comprised only 14% of global output in the 1990s.

However, despite these gains, productivity in agriculture is lagging badly in the developing world.

Where Is Productivity Falling Short?

A report by the Global Harvest Initiative (GHI) shows that productivity by small farmers in the lowest-income countries is growing at 1.3%.

The average rate of productivity growth across all countries is 1.73%, which is below the 1.75% level needed to keep up with global demand.

To keep up with the demands of a growing world population, the agriculture sector in the developing world will need to increase its efficiency.

Traders may find opportunities to speculate on industries that help modernize small farms.

Technology and Big Data

Technology is one way that farms can drive productivity gains. Technology and Big Data are increasingly driving decisions by farmers.

Crop monitoring technologies, apps that tell farmers the optimal time and place to plant crops as well as advanced DNA testing of livestock are among the many technological innovations in farming.

Modern farms will need to integrate the latest technologies into their operations to boost productivity and take on the competition.

Skill Gaps And Technological Recruitment

However, in many areas of the developing and some areas of the developed world, there is a severe skills gap.

To bridge this gap, farms of the future will have to recruit an educated and technology-savvy workforce.

Traders may find opportunities to speculate on both the technology that farmers use and the human resources to help them employ it.

Demand for Meat in China

With annual spending of more than $300 billion annually, China is the largest meat consumer in the world.

Meat consumption has been growing for the past two decades, and analysts expect growth of 3 to 4% annually for all proteins in the years ahead. The rising middle class in China is the main catalyst for this growth.

This trend will have enormous implications for global agricultural markets. China will require more grains to raise livestock and may need to import them.

Further, China is planning to invest heavily in the infrastructure required to modernize production and processing plants for beef, pork, poultry, and fish.

Climate Change: How Does It Impact Agriculture?

Gradual changes in global temperatures can increase the number of severely hot days in the growing season. These heat waves can dramatically reduce crop output and create price spikes.

Farmers are using genetics to develop more heat-resistant strains of crops.

Investments in biogenetics may benefit as a result of increases in global temperatures.

Top Agricultural Commodity Producing Countries

Traders can follow the broad agricultural market by monitoring the performance of some of the main indices that track the sector.

The following agriculture indices are a good barometer for trading demand in the sector since they measure the performance of agricultural commodity futures.

Where Can I Trade Agricultural Commodities?

Start your research with reviews of these regulated brokers available in , or for more detail see our guide to Agricultural Commodity Trading.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

Further Reading

If you’d like to learn about trading agricultural commodities, visit our Agricultural Commodity Trading Guide.

You can find guides to specific agricultural commodities on Commodity.com, like:

• Learn About Corn as a Commodity
• Learn About Live Cattle
• Read About Wood As a Commodity
• Soybeans: The Commodity.com Guide

For data related to US agriculture, see this short research piece on:

• Best Paying Cities For Agricultural Workers
• States Most Dependent On Agriculture
• States With the Most Organic Farms