Soft commodity

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A soft commodity is a commodity such as coffee, cocoa, sugar, corn, wheat, soybean and fruit. This term generally refers to commodities that are grown, rather than mined.[1] 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. Sometimes the term soft is restricted to commodities which are identified as primarily tropical, such as coffee, cocoa, 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.

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  1. ^ "Soft Commodity Definition". Investopedia. 2009-02-15. Retrieved 2012-12-06.