Commodity Market Ppt.

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.