Hello Readers!!,
Hope you guys are doing well in this Covid times. This is my next series of blogs on a topic which i have been associated at work for a decade now.
Commodity Trading & Risk Management shortly called CTRM, well I am neither a B-School expert nor a finance guru but this blog will be beneficial for people who are new to the CTRM domain or starting a job in this domain.
Lets set the foundations right!!
Commodity– A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas.
Trading– Activity involving Buying or Selling at a market place.
Risk Management- Understanding , Managing and Mitigating Risks
What Is a Commodity Market?
A commodity market is a marketplace for buying, selling, and trading raw materials or primary products.
Commodities are often split into two broad categories: hard and soft commodities.
- Hard commodities include natural resources that must be mined or extracted—such as gold, rubber, and Oil & Gas.
- Soft commodities are agricultural products or livestock—such as corn, wheat, edible oil, cotton, cocoa, coffee, sugar, soybeans, and pork.
Who is buying and who is selling?
Well, this depends on what is your intention in this trade cycle.
- A Mining company would be selling their metal, oil etc.
- A Jeweller would like to buy the metal for making ornaments
- A farmer would like to sell his Wheat or Coffee.
- A Baking company would like to buy wheat for making bread.
- A Coffee company would like to buy coffee beans to roast and make your favourite blend of coffee.
- A Thermal power plant would like to sell the electricity produced at the grid
- A Factory would like to buy the power from Grid for their Machineries to run.
So I think you now have a fair understanding on this
To be continued…….
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