Commodity Trading Flashcards
Define ‘primary commodity’.
‘A raw material or primary agricultural product that can be bought, sold or traded’.
Give some examples of ‘hard’ commodities.
Minerals, ores and metals.
Give some examples of ‘soft’ commodities.
Agricultural soft commodities - wheat, coffee etc.
Other than ‘hard’ and ‘soft’, what is the third category of primary commodity?
Oil.
In which sort of market would you buy now and pay today’s prices?
Spot market.
In which sort of market would you buy now and pay today’s prices for goods to be delivered at a later date (e.g. in a year’s time)?
Futures market.
What is exported to form Global Value Chains?
Intermediates, components and services.
What % of exports are finished products?
30%.
Name some of the supply factors that can influence commodity trading.
Yield increases, new inventions, temporary supply shocks (e.g. drought, flood), permanent supply shocks (e.g. new technology).
Name some of the demand factors that can influence commodity trading.
Change in consumer behaviour, change in policy or law, change in income or economies.
What does the acronym ‘PESTAL’ in PESTAL analysis stand for?
Political, economic, social, technological, environmental, legal.
Are the prices of commodities more or less volatile than prices of manufactured and industrial goods?
The prices of commodities are approximately 5x-10x MORE variable than the prices of manufactured and industrial goods.
What term is used to describe price fluctuation of a commodity?
Price volatility.
How is price volatility measured?
The day-to-day % difference in prices. It is the degree of variation that matters, NOT the price itself.
