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Before trading Contracts for Difference, Spread Bets or Foreign Exchange (ForEx or FX), ensure you fully understand the risks involved. These products may not be suitable for all types of investor. Trading in Contracts for Difference / Spread bets / FX carries a high degree of risk and is generally considered suitable only for the more experienced investor. Leveraged products carry a high degree of risk for your capital, and in some circumstances you may be liable for a greater sum than your initial capital invested. Past performance is not necessarily a guide to future performance. Seek independent financial advice if necessary. These products are suitable only for people over the age of 18. Information and analysis produced by Pretium Securities Ltd does not constitute a recommendation or offer to make a transaction in any derivatives or securities, and is intended to be general in nature. Pretium Securities Ltd is fully authorised and regulated by the Financial Services Authority.
The past performance of any investment is not necessarily a guide to future performance. The value of shares or income from them may go down as well as up. The value of shares may rise as well as fall due to the volatility of world markets, economic conditions/data and/or changes in the rate of exchange in the currency in which the investments are denominated. You may not necessarily get back the amount you invested. If you are in any doubt about investment, you should seek independent financial advice
 

 

Softs
 
 

The soft commodities we trade include Orange Juice, Sugar, Coffee and Cocoa. Unlike the hard commodities which are finite, these resources are mainly limited by the restrictions of acreage and growing conditions.

There is a substitution effect driven by the relative economic value of utilising land for one asset versus the other. As demand trends change within a developed economy, producers adapt their supply to meet this need. Developing economies are now starting to consume some soft commodities that they have easier access to, and as the borders open and the globe shrinks farmers around the world will amend their production accordingly. This is new demand, yet the total arable land is constant or even falling.

The derivative markets were actually created to cater for businesses that produced soft commodities and to ensure farmers can “lock-in” a price for their product. This was to limit the risk of price fluctuations around the time of harvest. This asset class has been utilised in recent years by speculators who also help to streamline the market and add liquidity.