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Publishing since 1997 

This site was designed for the sole purpose of assisting novice traders in their understanding of  the Commodity Futures Markets. Built as a paper trading tool, our site will hopefully provide a place where you can easily find the information that you need to become a better commodity trader.

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Researching Top Mining Companies

Coppermine Chuquicamata, Chile picture by Reinhard Jahn, Mannheim.When researching the top mining companies in the world, investors and traders must take into account several factors. Because mines are highly regionally specific, the success and longevity of a mining company will largely be based on how well it is able to maintain its access to a particular site, and how well that particular mine is maintained. Mining accidents can frequently occur, causing delays in production or, in some rare cases, the closure of an entire mine.

Some of the top mining companies in the world include Rio Tinto, Chinalco, Barrick, BHP Billiton, Vale CVRD, Alcoa, and Xstrata. Rio Tinto has been thriving due to its relatively expansive mining operations. Most successful mining companies generally do not focus on only one commodity, although it should be noted that a company such as Alcoa concentrates primarily on mining raw aluminum.

Rio Tinto is also a successful mining company because it understands how important the financial market and the corresponding performance of its commodities are to its longer term business strategy. On its home page, Rio Tinto provides links to financial reports before it provides links to the actual materials it mines. Regularly updated tallies of the worth of the commodities it provides also adorn the front page. Essentially, the Rio Tinto model should be applied to any mining company: does it provide its share holders and stake holders with the financial data needed to make financially beneficial and accurate decisions?

BHP Billiton has a similar approach to Rio Tinto, providing quotes and share holder services on its home page. Additionally, BHP Billiton pursues an aggressive strategy of expansion and addition. Because of its enormous size, the company can quickly acquire other mining companies and operations, thereby cementing its position as one of the world’s top mining companies.

Much as this guide advocated investigating the management strategies of top energy companies, the same principal holds true for mining companies. In a sense, the two types of companies have the same goal: to provide a usable commodity at the best possible price for a wide range of consumers and markets. Both industries face challenges in terms of environmental supply and consumer demand, although metals and minerals face different obstacles in their acquisition.

Alcoa is unique in being a top mining company without boasting significant product diversification. Alcoa has literally cornered the market on aluminum products, offering a suite of fabricated aluminum products at the ready, in addition to raw aluminum. However, because aluminum is such a pliable metal with so many different applications in both the industrial and domestic spheres, Alcoa’s ranking as one of the top mining companies is not surprising. It is equivalent to a single company controlling most of the fresh water on the earth. Obviously, this company would be enormous without having to offer variations on its product.

These major mining companies are currently trying to acquire each other, or at least broker some kind of agreement that allows them to share profits, as opposed to standing in direct opposition to one another. In the aluminum vein, Chinalco, which is a Chinese mining operation, is trying to work out deals with Rio Tinto. Chinalco is also trying to expand its operations beyond aluminum into other minerals and metals.

Trading Agriculture: Popular Food Commodites Coffee Beans.

Organic commodities differ from metals and other so-called ‘hard’ commodities in important ways: they are far more likely to spike and drop depending on consumer demand and growing seasons, and are therefore less insulated against market forces.

Trading Coffee

Coffee is traditionally traded in contract sizes of 37,500 pounds. Futures contracts are awarded in March, May, July, September, and December. The tick size is 5/100 cent per pound, which for every 1 cent gain, results in $375 per contract. An individual coffee tree usually requires 3 to 5 years to begin producing coffee beans. Each tree can usually produce roughly enough beans to fill a traditional coffee can during one full growing season. Columbia, Vietnam, Indonesia and Brazil are the primary coffee producers, with an average worldwide production of roughly 120 million kilo bags of coffee a year.

Trading Cocoa

Cocoa is traditionally traded in contract sizes of 10 metric tons, which is equivalent to 22,046 pounds. Futures contracts are awarded in March, May, July, September, and December. The tick size is $1.00 per metric ton, which results in $10 dollars for each contract. No usable cocoa can be produced until at least five years after the coca tree has been planted, and then it takes roughly 10 years before the tree can produce at its highest possible level. They need the equivalent of a tropical rain forest either 20 degrees above or below the equator in order to flourish. Because of these environmental requirements, cocoa trees are restricted in their growth patterns. Cote d’Ivorie, Ghana, and Indonesia are the top producers of cocoa beans, with an average annual production worldwide of roughly 3 million metric tons. Each of these countries is not renowned for its peaceable civic affairs. Additionally, potential cocoa traders should be advised that black pod disease and ‘witch’s broom,’ which is a type of fungus, frequently afflict cocoa trees and halt production. Currently, the best months for harvesting cocoa are between October and January.

Trading Sugar

Sugar Cane.Sugar is traditionally traded in contract sizes of 50 long tons, which is equivalent to 112,000 pounds. Futures contracts are awarded in March, May, July and October. The tick size is 1/100 of a cent per pound. Unlike cocoa and coffee, sugar itself is facing fairly intense competition from a variety of artificial or modified sweeteners, such as those made from corn syrup. The artificial sweeteners market has luckily tapered off in terms of popularity due to medical concerns; however, corn products currently are wrecking havoc with sugar prices. The top sugar producing countries include Brazil, India, China and Thailand. Again, potential investors should carefully watch the political developments of these countries to accurately predict when and how shortfalls in production may occur. Heavy rains can also destroy sugar cane crops. This is of special concern in Brazil, which experiences enormous precipitation each year. However, unlike cocoa, sugar cane can be grown in wider bands of the earth, resulting in higher yields, and an easier supply flow, even when one crop is destroyed by unavoidable weather fluctuations.

Trading Orange Juice

Orange Juice is traditionally traded in contract sizes of 15,000 pounds, and is always classified as frozen concentrated orange juice in order to be deliverable. Futures contracts are awarded in the months of January, March, May, July, September, and November. The tick size is 5/100 cent per pound. Brazil and the U.S. are the primary producers of orange juice, with Brazil having recently ascended to the title of world’s number one orange juice producer. As featured in the 1983 movie “Trading Places,” the greatest threat to orange juice futures are freak freezes in typically warm