The fluctuations in climate have a big impact on commodity prices, especially agricultural commodities. A shift in rainfall, temperature, or even natural disasters could affect supply and demand, resulting in farmers, traders, and investors constantly keeping an eye on climate trends. If traders know how weather events affect the market, they can use these insights to manage risks.
What Are Agricultural Commodities?
Crops and livestock which are sourced from farming and livestock processes are classified as agricultural commodities. Common commodities include staple foods like wheat, corn and soybeans, beverages like coffee and animal products like beef and poultry. These commodities are vital in serving international food supply chains and are traded globally in commodity markets.
How Do Agricultural Commodities Work?
Agricultural commodities are types of commodities that are sold and purchased in the market through options, spot trading and futures contracts. Farmers mitigate the risk of price uncertainties by selling their commodities in advance with futures contracts. Traders ensure they know exactly when to trade, making decisions based on the countless events that can take place, including weather changes, geopolitics, and supply and demand changes.
How Can The Weather Affect Commodities?
The cultivation, pricing, and even trading of commodities, particularly commodities and agricultural products, are heavily influenced by weather. Droughts, floods, extreme frost, and storms lead to farming cycles being disrupted and a reduction in farmland yield, with an escalation in prices.
The Impact of Climate on Agricultural Farming and Prices
Weather changes significantly affect the yield, quality of harvest, and the overall supply chain. Some relevant issues and factors of weather affecting commodity prices are discussed below:
Severe Drought
Droughts usually mean less yield and more scarcity in the future, causing prices of affected commodities such as wheat, corn and soybean to increase.
Heightened Rainfall
Excessive amounts of rain can result in floods, damaging crops, which eventually leads to price increases and commodity shortages in the markets.
Frost and Freezing Temperatures
Sudden frost can greatly damage and in some cases completely destroy crops such as oranges and coffee beans, consequently increasing their prices
Hurricanes and Storms
Increased severe storms bring destruction to any agriculture-related infrastructure exacerbating the problem of transportation. This results in elevating the prices of these commodities due to large-scale agricultural production halting.
Impact of Forest Wildfires
Forest wildfires worsen the condition of agricultural lands and severely damage forestry products, weakening the supply of commodities and subsequently increasing their costs.
How to Get Started with Trading Commodities
Trading commodities entails purchasing and selling a commodity in financial markets. Interested traders should acquire skills in analysing the market, managing risks, and understanding other relevant parts of the globe. Using specialised recruitment experts, like Redstone Search, that deal with recruitment for professionals in commodity trading is one of the most effective ways to get into this branch of trading.
What are The UK’s Top Agricultural Commodities?
The UK’s reputation for high-quality agricultural commodities has supported both domestic consumption and exports. The UK leads the world in agricultural commodities like wheat, which is utilised for making bread along with animal feed, and barley, which is essential for brewing and livestock farming. The UK also ranks among the highest producers of cooking oil and biofuel rapeseed, as well as potatoes.
Other UK Agricultural Commodities
Other agricultural products from the UK include milk and cheese which is exported all around the world. UK-produced beef and lamb are also well-known and in high demand due to the quality of the grass-fed livestock. These commodities ensure food security within the country and strengthen international relations through trade, thus making agriculture in the UK an essential aspect of the economy.