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What is Commodity market?

• Commodity markets are markets where raw or


primary products are exchanged.
• It covers physical product (food, metals, electricity)
markets but not the ways that services, including
those of governments, nor investment nor debt, can
be seen as a commodity.
History of Commodity Market
• Modern Commodity Market have their roots in the
trading of agricultural products.
• Wheat and corn, cattle and pigs, were widely traded
using standard instruments in the 19th century in the
United States.
• Historically, in ancient times Sumerian use of sheep
or goats, or other peoples using pigs, rare seashells, or
other items as commodity money, have traded
contracts in the delivery of such items, to render trade
itself more smooth and predictable.
Size of the Market
• The trading of commodities includes physical trading
of food items, Energy and Metals, etc. and trading of
derivatives.
• In the five years up to 2007, the value of global
physical exports of commodities increased by 17%
while the notional value outstanding of commodity
OTC derivatives increased more than 500% and
commodity derivative trading on exchanges more
than 200%.
Cont…
• Agricultural contracts trading grew by 32% in 2007,
energy 29% and industrial metals by 30%.
• Precious metals trading grew by 3%, with higher
volume in New York being partially offset by
declining volume in Tokyo.
• OTC trading accounts for the majority of trading in
gold and silver.
List of Traded Commodity
• Agricultural (Grains, and Food and Fiber)
• Livestock & Meat
• Energy
• Precious metals
• Industrial metals
Cont…
• Agricultural Products:- Corn, Oats, Rough Rice,
Soybeans, Rapeseed, Soybean Meal, Soybean Oil,
Wheat, Cocoa, Coffee C, Cotton No.2, Sugar No.11,
Sugar No.14.
• Livestock and Meat:- Lean Hogs, Frozen Pork
Bellies, Live Cattle, Feeder Cattle.
• Energy:- WTI Crude Oil, Brent Crude, Ethanol,
Natural Gas, Heating Oil, Gulf Coast Gasoline,
RBOB Gasoline, Propane, Uranium.
Cont…
• Precious Metal:- Gold, Platinum, Palladium, Silver.
• Industrial Metals:- Copper, Lead, Zinc, Tin,
Aluminium, Aluminium alloy, Nickel, Aluminium
alloy, Recycled steel.
Commodity Exchanges
• Abuja Securities and Commodities Exchange
• Bhatinda Om & Oil Exchange Bathinda
• Brazilian Mercantile and Futures Exchange
• Chicago Board of Trade
• Chicago Mercantile Exchange
• Commodity Exchange Bratislava, JSC
• Dalian Commodity Exchange
• Dubai Mercantile Exchange
• Euronext.liffe
• Intercontinental Exchange
Cont…
• Minneapolis Grain Exchange
• Multi Commodity Exchange
• National Commodity and Derivatives Exchange
• National Multi-Commodity Exchange of India Ltd
• National Food Exchange
• New York Mercantile Exchange
• New York Board of Trade
• Rosario Board of Trade
• Steelbay
Cont…
• Kansas City Board of Trade
• London Metal Exchange
• Winnipeg Commodity Exchange
• National Spot Exchange
Recent trends in Commodity
Market
• The 2008 global boom in commodity prices - for
everything from coal to corn – was fueled by heated
demand from the likes of China and India.
• Speculation in forward markets.
• Farmers are expected to face a sharp drop in crop
prices as a result of bad rainfall.
• Other commodities, such as steel, are also expected to
fall due to lower demand.
Future Contract
• Commodity and Futures contracts are similar as
"Forward" Contracts.
• Early days "future" contracts (agreements to buy
now, pay and deliver later) were used as a way of
getting products from producer to the consumer.
• These typically were only for food and agricultural
Products.
• Now it is used for every metal.
• Future contract for commodity trading and for share
trading is all different from one another.

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