Commodity Trading Flashcards
What is a primary commodity?
A raw material or primary agricultural product that can be bought, sold, or traded.
Give examples of primary commodities.
Titanium, coffee, rubber, wheat, beef, cotton, timber.
What are the two main categories of primary commodities?
Soft Commodities: Agricultural products like wheat and coffee.
Hard Commodities: Minerals, ores, metals, and oil.
Why do countries and businesses trade commodities?
o use them as inputs for production.
For essential products with no or few substitutes (e.g., energy).
What are the two main markets for trading commodities?
Spot Market: Immediate transactions at current prices.
Futures Market: Contracts to buy/sell at a future date.
Where does the UK import most of its gas from?
Norway, Russia, Belgium, and the Netherlands.
What percentage of global trade involves intermediate goods/services?
70%.
What factors influence the demand for commodities?
Consumer behavior changes.
Policy and law changes.
Economic factors like income levels.
What are key factors affecting the supply of commodities?
Technological advancements.
Temporary shocks (e.g., droughts, floods).
Permanent changes (e.g., new technology).
Why are commodity prices more volatile than industrial goods?
Due to frequent and significant fluctuations caused by weather, production levels, and delivery constraints.
Name some political factors influencing commodity trading.
Government policies, leadership changes, trade regulations, and tax policies.
Why are environmental factors important in commodity trading?
Due to resource scarcity, pollution targets, sustainability goals, and carbon footprint targets.
How did lifting the UK fracking ban affect trade?
It increased domestic production and reduced reliance on imports.
What is “price volatility” in commodities?
Day-to-day percentage differences in prices, influenced by supply and demand factors.
How does the shift to alternative energy sources impact commodity trading?
Reduces demand for traditional fuels, leading to changes in domestic production and imports.
