Soft commodities, or softs, are

commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...

such as

coffee Coffee is a beverage brewed from roasted, ground coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content, but decaffeinated coffee is also commercially a ...

, cocoa,

sugar Sugar is the generic name for sweet-tasting, soluble carbohydrates, many of which are used in food. Simple sugars, also called monosaccharides, include glucose Glucose is a sugar with the Chemical formula#Molecular formula, molecul ...

corn Maize (; ''Zea mays''), also known as corn in North American English, is a tall stout Poaceae, grass that produces cereal grain. It was domesticated by indigenous peoples of Mexico, indigenous peoples in southern Mexico about 9,000 years ago ...

wheat Wheat is a group of wild and crop domestication, domesticated Poaceae, grasses of the genus ''Triticum'' (). They are Agriculture, cultivated for their cereal grains, which are staple foods around the world. Well-known Taxonomy of wheat, whe ...

soybean The soybean, soy bean, or soya bean (''Glycine max'') is a species of legume native to East Asia, widely grown for its edible bean. Soy is a staple crop, the world's most grown legume, and an important animal feed. Soy is a key source o ...

fruit In botany, a fruit is the seed-bearing structure in flowering plants (angiosperms) that is formed from the ovary after flowering. Fruits are the means by which angiosperms disseminate their seeds. Edible fruits in particular have long propaga ...

and

livestock Livestock are the Domestication, domesticated animals that are raised in an Agriculture, agricultural setting to provide labour and produce diversified products for consumption such as meat, Egg as food, eggs, milk, fur, leather, and wool. The t ...

.Patrick Maul, ''Investing in Commodities'', diplom.de, 2011, p
8
table c. The term generally refers to

that are grown, rather than mined; the latter (such as oil, copper and gold) are known as hard commodities. Soft commodities play a major part in the futures market. They are used by

farmer A farmer is a person engaged in agriculture, raising living organisms for food or raw materials. The term usually applies to people who do some combination of raising field crops, orchards, vineyards, poultry, or other livestock. A farmer ...

s wishing to lock-in the future prices of their

crop A crop is a plant that can be grown and harvested extensively for profit or subsistence. In other words, a crop is a plant or plant product that is grown for a specific purpose such as food, Fiber, fibre, or fuel. When plants of the same spe ...

s, by commercial purchasers of the products, and by speculative investors seeking a profit. The adjective "soft" is occasionally only applied to products that are classified as largely tropical, such coffee, chocolate, sugar, cotton, and orange juice. Soft commodities have been known to adopt a

backwardation Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's forward contract, forward or futures contract is trading below the ''expected'' spot price at contract maturity. The resulting fu ...

trend until the late 1990s when futures were actively traded. Speculation and investment requirements later shaped the common

contango Contango is a situation in which the futures contract, futures price (or forward contract, forward price) of a commodity is higher than the spot price. In a contango situation, arbitrageurs or speculators are "willing to pay more for a commodity ...

trend.

References

* {{finance-stub

See also

References