| Most CFD traders in the UK relate commodities | | | | Lumber |
| to the harder metals and oil issues, but many | | | | |
| CFDs are available in the important area of | | | | Lumber is wood that has been cut into boards |
| 'softs'. This sector generally refers to | | | | or other shapes for the purpose of |
| commodities that are grown instead of being | | | | woodworking or construction, and it is |
| mined, and this brief paper describes the | | | | supplied in rough form or finished. Rough |
| background and factors that affect supply and | | | | lumber is the raw material for furniture |
| demand. | | | | making and other items requiring additional |
| | | | cutting and shaping. Finished lumber is |
| The main 'softs' are as follows: | | | | supplied in standard sizes, mostly for the |
| | | | construction industry, and is primarily one |
| Sugar | | | | of a few needle-bearing species such as pine, |
| | | | hemlock, fir or spruce. |
| This is a form of carbohydrate, of which the | | | | |
| most commonly used is the crystal white | | | | The main market is Dimensional lumber which |
| version, or sucrose, used in flavouring. | | | | is a term used in the US for lumber that is |
| Sugar sucrose is extracted and refined from | | | | finished or planed and cut to standardized |
| sugar cane, sugar beets, or sugar palm. | | | | width and depth spcified in inches. In Europe |
| | | | the sizing is slightly different. |
| Most cane sugar is grown in countries with | | | | |
| warm climates, such as Brazil, India, (parts | | | | Although lumber is often a localised market |
| of) China, Australia, Fiji and Mexico. It is | | | | product, it goes without saying that demand |
| noticeable that developing countries produced | | | | is heavily linked to the health of the |
| more sugar than developed countries. Beet | | | | construction industry worldwide. |
| sugar tends to grow in regions with cooler | | | | |
| climates, such as Northwest and Eastern | | | | Cotton |
| Europe, Northern Japan, and some areas of the | | | | |
| US. | | | | This is the fibre that grows around the seeds |
| | | | of the cotton plant, and which results in a |
| In the northern hemisphere, the beet growing | | | | spun textile which is soft and highly |
| season ends with the start of harvesting | | | | breathable. The major producers of cotton in |
| around September, and harvesting and | | | | are China, India, the US, Pakistan, Brazil, |
| processing usually continues until March. The | | | | Uzbekistan, and Turkey. |
| availability of processing plant capacity, | | | | |
| and the weather, are major influences on the | | | | The big question for longer term investors in |
| duration of harvesting and processing. It is | | | | cotton's bull market is simply how much China |
| possible to hold harvested beet until | | | | and lesser Far eastern producers can |
| processed, but frost damaged beet cannot | | | | effectively become self-sufficient, and |
| usually be processed. | | | | lessen the historic export demand from the |
| | | | US, where the market has traditionally been |
| Much of the impetus behind the recent bull | | | | based. |
| market has come from the effects of drier | | | | |
| weather on the Brazilian cane market. As with | | | | Strong price advances have now began to |
| all grown commodities, though, the area | | | | influence farmers' plantings decisions and |
| planted to cane has been expanding at the | | | | encourage an even greater expansion in the |
| expense of other crops such as coffee and | | | | area sown to cotton in these countries. The |
| oranges, a trend which is expected to | | | | International Cotton Advisory Committee |
| continue. The other growing usage has been | | | | forecast that world plantings would rise |
| for ethanol, but this is so far not widely | | | | about 3% in 2006-07 with much of the |
| used outside of Brazil. | | | | expansion to take place in mainland China and |
| | | | India. |
| Cocoa | | | | |
| | | | Because of more prevalent use of better seed |
| This is the dried and partly fermented fatty | | | | varieties that are disease resistant, more |
| seed of the cacao tree. From it comes | | | | than likely above average yields will |
| chocolate, and it can be powdered into cocoa | | | | continue to be seen, unless there is some |
| powder. Cocoa butter also derives from the | | | | unusually bad weather in key growing areas, |
| dark, bitter cocoa solids. | | | | so this is a fascinating market to follow. |
| | | | |
| Demand for the cocoa market is generally | | | | Coffee |
| steady, but supply is often affected by | | | | |
| political considerations given the many | | | | Coffee is one of the world's major commodity |
| unstable areas from where it is extracted, | | | | crops and a major export of some countries. |
| especially West Africa. | | | | |
| | | | The two main cultivated species of the coffee |
| Orange Juice | | | | plant are Coffea canephora (robusta) and |
| | | | Coffea Arabica (arabica), of which the latter |
| The main factors affecting the orange crop | | | | is considered more suitable for drinking as |
| are the prevalence of freezing nights, so | | | | it is less bitter and more flavourful. |
| production has to be in tropical or warm | | | | |
| temperate areas. The major exporters of | | | | Around three quarters of worldwide |
| organic fresh citrus in Europe are Italy, | | | | cultivation is Arabica, but robusta is less |
| Spain and Greece, and elsewhere, Argentina, | | | | susceptible to disease than and can be |
| the US, Brazil, Israel, Costa Rica, Mexico, | | | | cultivated in environments where arabica does |
| and Cuba are major exporters. | | | | not thrive. Robusta coffee contains about |
| | | | 40-50% more caffeine than arabica, and is |
| The major organic citrus juice market is for | | | | used as an inexpensive substitute for arabica |
| orange juice, and there has been a rise in | | | | in many commercial coffee blends. |
| "Not from Concentrate" OJ as opposed to | | | | |
| frozen canned OJ in recent years. | | | | Most arabica coffee beans originate from |
| | | | Latin America, East Africa, Arabia, or Asia. |
| The main supply determinants are climatic. | | | | Robusta coffee beans are grown in West and |
| The later in the winter a freeze occurs, the | | | | Central Africa, throughout Southeast Asia and |
| less damage there is as early and mid-season | | | | Brazil. |
| varieties are already mostly picked off the | | | | |
| trees and for instance in Spain, Valencia | | | | The sugar market came to life in 2005, and |
| oranges are mature enough that many can be | | | | coffee followed shortly afterwards, with |
| salvaged if processed immediately. Cooler, | | | | growing demand not matched by increase in |
| but not freezing, temperatures can actually | | | | supply, as many developing nations become |
| be beneficial for the crop as it promotes | | | | more affluent and increase their coffee |
| good colour. | | | | consumption. |
| | | | |