Soft commodity

Soft commodities, or softs,^[1][2] are commodities such as coffee, cocoa, sugar, corn, wheat, soybean, fruit and livestock.^[3] The term generally refers to commodities that are grown, rather than mined; the latter (such as oil, copper and gold) are known as hard commodities.^[4][3]

Soft commodities play a major part in the futures market. They are used by farmers wishing to lock-in the future prices of their crops, 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 trend until the late 1990s when futures were actively traded. Speculation and investment requirements later shaped the common contango trend.

1. ^ Scott Barrie, Lita Epstein The Complete Idiot's Guide to Options and Futures 2006 Page 49 "The Food and Fiber futures, also known as the Softs, are a hodgepodge of commodities ranging from Coffee to Cocoa, and Sugar to Orange Juice."
2. ^ Carley Garner Trading Commodities, Commodity Options and Currencies 0133091325 - 2012 "Many of the softs are grown in third-world countries, and the data is far less reliable than that published by the USDA (United States Department of Agriculture) on domestically produced commodities. The softs are among the most complicated"
3. ^ ^{a b} Patrick Maul, Investing in Commodities, diplom.de, 2011, p. 8, table c.
4. ^ "Soft Commodity Definition". Investopedia. 2009-02-15. Retrieved 2012-12-06.

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