A soft commodity is generally a commodity that is grown, rather than mined, such as coffee, sugar, cotton and orange juice. There is a large futures market for soft commodities involving both investors and farmers..
Soft commodities is a label for a set of commodities that includes cocoa, sugar, soy beans, grains, orange juice and coffee, to name a few. Soft commodities are generally differentianted from "hard" commodities such as metals and chemicals in that they are grown rather than mined.
Soft commodity futures are used by farmers to lock in prices for their crops, and also by speculators seeking to make a profit. They tend to be affected by extranous factors such as the weather, seasonality, reports of disruption to production and other supply and demand issues. Some of the risks include currency moves, weather and intervention by governments and the markets can be very volatile.
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