{"id":9575,"date":"2023-08-10T09:02:21","date_gmt":"2023-08-10T09:02:21","guid":{"rendered":"https:\/\/blog.vtmarkets.net\/?p=9575"},"modified":"2023-08-10T09:02:21","modified_gmt":"2023-08-10T09:02:21","slug":"from-tulip-mania-to-modern-markets-how-to-trade-soft-commodities","status":"publish","type":"post","link":"https:\/\/www.vtmarkets.net\/it\/learn\/from-tulip-mania-to-modern-markets-how-to-trade-soft-commodities\/","title":{"rendered":"From “Tulip Mania” to modern markets: How to trade soft commodities\u00a0"},"content":{"rendered":"\n

In the 17th-century Dutch Golden Age, a mesmerising phenomenon called “Tulip Mania” took centre stage, forever changing economic history. <\/p>\n\n\n\n

Tulips, normally beloved for their beauty, became the focus of an astonishing speculative bubble. Prices soared to unimaginable heights, with a single rare bulb fetching the value of a grand house in Amsterdam. <\/p>\n\n\n

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source: Amsterdam Tulip Museum<\/sup><\/sub><\/figcaption><\/figure><\/div>\n\n\n

Enthusiastic investors rushed into the tulip trade, lured by the promise of untold riches. However, reality intervened, and the bubble burst, leaving many penniless as prices plummeted. <\/p>\n\n\n\n

Tulip Mania<\/a> remains a powerful lesson in speculative trading and the impact of soft commodities on markets and human behaviour. Soft commodities, the backbone of the global economy and vital for human sustenance throughout history, have a longstanding history of trade spanning centuries.  <\/p>\n\n\n\n

Today, the soft commodities market has evolved into a highly sophisticated arena, surpassing the archaic bartering systems of the past. Its allure lies in the remarkable liquidity and critical significance of these commodities, presenting traders with abundant opportunities to capitalise on profitable ventures in the global markets. <\/p>\n\n\n\n

This article aims to provide a comprehensive understanding of soft commodities, elucidating their definition and elucidating the avenues for trading them directly or through financial derivative instruments. Moreover, we will explore the various factors that wield influence over soft commodity prices and delve into effective strategies for managing a diversified portfolio that includes these valuable assets. <\/p>\n\n\n\n

Understanding Soft Commodities<\/strong> <\/h5>\n\n\n\n

Soft commodities refer to natural resources that are cultivated and harnessed for various purposes, including food production, construction, manufacturing consumable goods, and facilitating other human activities. <\/p>\n\n\n\n

These products are derived from the earth’s resources but necessitate human effort to be transformed into marketable goods that can be traded. They are commonly referred to as ‘softs’ within the trading industry. <\/p>\n\n\n\n

Examples of Soft Commodities<\/strong> <\/h5>\n\n\n\n

Soft commodities encompass a diverse range of products, originating from various geographical regions worldwide, where optimal conditions favour their production. Despite their distinct origins, these commodities are categorised together due to their indispensable role in human sustenance and their natural composition, which allows for further refining or processing to yield other goods. <\/p>\n\n\n\n

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Here are some noteworthy examples of soft commodities:
Coffee beans, Wheat, Cocoa, Sugar, Rough rice, Palm and kernel oil, Cotton, Hogs, Soybeans, Live cattle, Oats, Corn, Lumber.<\/p>\n\n\n\n

Given the global nature of their sourcing, soft commodities are subject to price fluctuations influenced by factors such as weather conditions, disruptions in supply chains, and economic uncertainties. These fluctuations create ample opportunities for traders to speculate on the short and long-term movements of their prices. <\/p>\n\n\n\n

What Are Hard Commodities?<\/strong> <\/h5>\n\n\n\n

To grasp the concept of commodities comprehensively, it is essential to distinguish between hard and soft commodities. <\/p>\n\n\n\n

Unlike soft commodities that require cultivation and human intervention, hard commodities are directly extracted or mined from the earth and used in their raw, unprocessed state. <\/p>\n\n\n\n

These commodities consist of finite natural resources, including crude oil, natural gas, as well as renewable energies such as solar, hydro, wind, and geothermal power. <\/p>\n\n\n\n

Factors Influencing Soft Commodities Prices<\/strong> <\/h5>\n\n\n\n

The price of soft commodities is subject to the influence of various natural and human-related elements. Some key factors include: <\/p>\n\n\n\n