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