Fundamental Commodity Analysis

Fundamental Commodity
Analysis
By
www.CandlestickForums.com

Fundamental commodity analysis is how
traders understand the big picture.

It is how they maintain a sense of
perspective in commodities markets.

Commodity prices fluctuate in the short
term based on technical trading analysis.

Long term commodity trading is much
more heavily based upon fundamental
analysis of the commodities markets.

Fundamental commodity analysis comes
down to two factors, supply and demand
in commodity trading.

Commodities and Futures Training can
be a great help in developing effective
strategies for trading on a commodities
exchange.

The commodity futures market is
different for crops and livestock than it is
for durable commodities such as gold.

Commodities trading in each can be
profitable but it is important for

commodities traders to understand the
differences in supply and demand for
these two types of commodities.

Here we look at crops and livestock.

Commodity supply can be influenced by
a large number of factors. Supply factors
are different for trading agricultural

commodities as opposed to the
commodity market in precious
metals, for example.

Food can be stored dry or refrigerated
but eventually needs to be consumed.
Food is, in fact, produced to be eaten.

Therefore the supply of crops and
livestock needs to be replenished every
growing season.

This makes food commodities
susceptible to short term factors such as
the weather in different parts of the
globe.

It also makes food supply dependent
upon adequate storage as well as
transportation from producing areas to
the consumer.

Fundamental commodity analysis of
these factors will improve the chances of
success in trading commodities.

The amount of crops planted, the
amount not consumed last year, crop
disease, weather, anything that stops
food from arriving at the table, and
technology.

Low supply leads to higher commodity
prices and higher prices lead to more
production and higher supply.

Higher supply leads to lower prices and
reduced production and then the cycle
repeats itself.

Commodity investing will be more
successful if the trader understands the
factors that increase and decrease food
production and availability of the
commodity.

The so called Green Revolution that
increased crop yields not only fed
millions more but it helped keep each
grain commodity price within
reasonable limits.

An understanding of genetic engineering
and crop yields is an excellent example
of fundamental commodity analysis.

Fundamental commodity analysis starts
with supply but supply is inextricably
tied to demand.

Absolutely sufficient supply related to
demand would mean that commodity
prices would stay absolutely fixed, year
after year.

Commodity trading charts would just
show a flat line extending into the
future.

Commodity trading software would not
be needed and, in fact, food would not
be a trading commodity.

With a growing world population and
more affluent societies in Asia
demanding more protein rich food the

demand for livestock has gone up and
grains are diverted into cattle feed
instead of being sent to the table.

Understanding the changing dietary
patterns of much of the developing
world is part of fundamental commodity
analysis.

Good commodities tips may have as
much to do with what Chinese teenagers
want to eat as with how much land is

planted in Argentina, Brazil, the United
States, Canada, and the Ukraine.

Fundamental Commodity Analysis

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Fundamental Commodity Analysis