Fundamental Commodity Analysis

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Fundamental Commodity Analysis

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.

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Fundamental Commodity Analysis

  1. 1. Fundamental CommodityAnalysisBywww.CandlestickForums.com
  2. 2. Fundamental commodity analysis is howtraders understand the big picture.www.CandlestickForums.com
  3. 3. It is how they maintain a sense ofperspective in commodities markets.www.CandlestickForums.com
  4. 4. Commodity prices fluctuate in the shortterm based on technical trading analysis.www.CandlestickForums.com
  5. 5. Long term commodity trading is muchmore heavily based upon fundamentalanalysis of the commodities markets.www.CandlestickForums.com
  6. 6. Fundamental commodity analysis comesdown to two factors, supply and demandin commodity trading.www.CandlestickForums.com
  7. 7. Commodities and Futures Training canbe a great help in developing effectivestrategies for trading on a commoditiesexchange.www.CandlestickForums.com
  8. 8. The commodity futures market isdifferent for crops and livestock than it isfor durable commodities such as gold.www.CandlestickForums.com
  9. 9. Commodities trading in each can beprofitable but it is important forwww.CandlestickForums.com
  10. 10. commodities traders to understand thedifferences in supply and demand forthese two types of commodities.www.CandlestickForums.com
  11. 11. Here we look at crops and livestock.www.CandlestickForums.com
  12. 12. Commodity supply can be influenced bya large number of factors. Supply factorsare different for trading agriculturalwww.CandlestickForums.com
  13. 13. commodities as opposed to thecommodity market in preciousmetals, for example.www.CandlestickForums.com
  14. 14. Food can be stored dry or refrigeratedbut eventually needs to be consumed.Food is, in fact, produced to be eaten.www.CandlestickForums.com
  15. 15. Therefore the supply of crops andlivestock needs to be replenished everygrowing season.www.CandlestickForums.com
  16. 16. This makes food commoditiessusceptible to short term factors such asthe weather in different parts of theglobe.www.CandlestickForums.com
  17. 17. It also makes food supply dependentupon adequate storage as well astransportation from producing areas tothe consumer.www.CandlestickForums.com
  18. 18. Fundamental commodity analysis ofthese factors will improve the chances ofsuccess in trading commodities.www.CandlestickForums.com
  19. 19. The amount of crops planted, theamount not consumed last year, cropdisease, weather, anything that stopsfood from arriving at the table, andtechnology.www.CandlestickForums.com
  20. 20. Low supply leads to higher commodityprices and higher prices lead to moreproduction and higher supply.www.CandlestickForums.com
  21. 21. Higher supply leads to lower prices andreduced production and then the cyclerepeats itself.www.CandlestickForums.com
  22. 22. Commodity investing will be moresuccessful if the trader understands thefactors that increase and decrease foodproduction and availability of thecommodity.www.CandlestickForums.com
  23. 23. The so called Green Revolution thatincreased crop yields not only fedmillions more but it helped keep eachgrain commodity price withinreasonable limits.www.CandlestickForums.com
  24. 24. An understanding of genetic engineeringand crop yields is an excellent exampleof fundamental commodity analysis.www.CandlestickForums.com
  25. 25. Fundamental commodity analysis startswith supply but supply is inextricablytied to demand.www.CandlestickForums.com
  26. 26. Absolutely sufficient supply related todemand would mean that commodityprices would stay absolutely fixed, yearafter year.www.CandlestickForums.com
  27. 27. Commodity trading charts would justshow a flat line extending into thefuture.www.CandlestickForums.com
  28. 28. Commodity trading software would notbe needed and, in fact, food would notbe a trading commodity.www.CandlestickForums.com
  29. 29. With a growing world population andmore affluent societies in Asiademanding more protein rich food thewww.CandlestickForums.com
  30. 30. demand for livestock has gone up andgrains are diverted into cattle feedinstead of being sent to the table.www.CandlestickForums.com
  31. 31. Understanding the changing dietarypatterns of much of the developingworld is part of fundamental commodityanalysis.www.CandlestickForums.com
  32. 32. Good commodities tips may have asmuch to do with what Chinese teenagerswant to eat as with how much land iswww.CandlestickForums.com
  33. 33. planted in Argentina, Brazil, the UnitedStates, Canada, and the Ukraine.www.CandlestickForums.com

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