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Commodity futures have been a popular destination for active traders over the years. These contracts allow for short-term positions that can offer the high risk/reward potentials that a number of investors seek.

For the most part, these are not meant for laissez-faire investors as holding a futures contract until maturity will result in the delivery of the underlying commodity; very few people want bales of cotton or wheat showing up on their doorstep. In fact, these contracts can be rather tricky, leaving them for only the most experienced and knowledgeable traders who fully understand the risks of owning a complicated futures account and moving in and out of these positions [see also The Guide To The Biggest Companies In Every Major Commodity Sector].

For those looking to establish long-term exposure to futures, as any diversified portfolio deserves a small, but important, commodity allocation, there are other options. The exchange-traded world has democratized this asset class by offering products that hold futures contracts and complete the roll process automatically, avoiding delivery and constant management on the investor’s end. But even with the expansion of this industry, only the most popular futures contracts have an ETP dedicated to them, and for good reason. There are a number of contracts available for trading that are downright bizarre and in most cases, investors may not even be aware of their existence [see also Commodity Investing: Physical vs. Futures].

Below, we outline seven of the strangest futures options (in no particular order) for investors looking to mix up their holdings, or simply educate themselves on what else is available for trading.

International Skimmed Milk Powder

Production Factory

Even for this list, these futures are pretty strange, and judging by the almost entirely absent volumes, it seems like the rest of the investing world agrees. The contracts are priced in cents per metric ton and each contract represents 20 tons. These futures can be found on the CME, and trade 12 contracts each year, one per month. While these may seem impractical, consider that they could be used as a hedging tool for farmers that produce large amounts of milk each year. Regardless, it will be unlikely that you will ever see substantial volumes on these contracts, as the daily trades are usually represented by a goose egg (zero).

Cash-Settled Butter

Similar to milk, these futures can possibly be used by farmers for hedging but, again, are sporting volumes that are practically non-existent. The futures are quoted in cents per pound, and a single contract represents 20,000 pounds (or 9 metric tons) of butter; certainly a contract you would not want to forget to sell as the delivery would be a nightmare. Contracts trade on all calendar months and again, call the CME home. There is also a butter spot-call contract for those not satisfied with the regular futures option.

Cheese

Perhaps this contract would do better in countries like France and Switzerland, but nevertheless, U.S. investors can gain exposure to cheese futures right here on the CME. Things are looking up for cheese as it seems to be more popular than the aforementioned contracts, with at least some volume to show for itself. Similar to butter, cheese futures are represented in cents per pound and a single contract consists of 20,000 pounds. As far as practical uses, cheese futures can again be used by farmers and those in the restaurant industry. Beyond that, it is hard to imagine anyone actively trading cheese futures for a living.

Frost

Frost on a Tree

No, your eyes have not deceived you; the CME offers futures contracts on frost. And what’s more, seasonal and monthly frost contracts are available for those investors looking to diversify their all-important frost holdings. For those interested in how these products are calculated, the CME offers a detailed description here. The basic gist comes from temperatures in certain areas at given times. If conditions are met, like having a -3.5 celsius reading in March when the local time is 0700, the contract is fulfilled. So the futures do not necessarily measure frost itself, but rather the conditions that are likely to produce it. These contracts could give farmers, who rely on products that are very susceptible to frost, an easy way to hedge their bets on crops, making volatile swings in the profits less likely.

Frozen Orange Juice

Beyond farmers in Florida, it’s hard to imagine anyone finding use for frozen orange juice contracts. The contracts are listed in the U.S. on the ICE and seem to have a more sound investment thesis than others on this list. According to the ICE, “weather sensitivity, when combined with the competitive global juice and beverage market, and rapidly changing supply and demand, makes the price of orange juice extremely volatile”, making these futures an interesting play. Most traders will be seeking contracts that exhibit large daily movements in order to turn a profit, putting orange juice on the map for some investors. In case you aren’t sure how to play these rather odd contracts, never fear, they’re optionable.

Pepper

To find pepper futures, one has to move outside of the U.S. to India and the NCDEX. While pepper futures may seem strange to domestic investors, it makes more sense in place like Asia where spices are found much more abundantly. Pepper futures are likely used by Indian farmers just as often as U.S. farmers use cotton or sugar contracts to hedge their crops. According to the NCDEX, pepper is one of the most popular spices in the world and is used for both flavor and medicinal purposes. “In India, harvesting starts from December and extends till March whereas the arrivals in the physical markets start from February.” Major importing regions include the EU and U.S., though India is the largest consumer of pepper. As far as strange commodities go, this seems like a very practical option that domestic investors may simply not be used to.

Sunflower Seeds

Aside from their frequent consumption at sporting events, namely baseball, sunflower seeds are without a doubt one of the strangest futures options available. To find these contracts, one must look to the SAFEX, a South African exchange. Contracts are measured in 50 metric tons and trade in March, May, July, September, and December. Perhaps what is most strange about these contracts is that sunflowers are native to the Americas, and South Africa is not even in the top 10 largest producing countries of seeds in the world as of 2014. The top three include Ukraine, Russia, and Argentina, in that order. Regardless, if you are looking to make a play on these popular seeds, there are certainly options available.

[For more commodity news sign up for our free commodityHQ newsletter.]

Disclosure: Photo courtesy of Daniel Schwen. No positions at time of writing.

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