Commodity exchange - SS1 Commerce Lesson Note

Commodity Exchange:

A commodity exchange is a platform or marketplace where various goods or products, known as commodities, are traded. It serves as an organized marketplace where buyers and sellers can come together to buy and sell commodities based on standardized contracts.

These exchanges provide a transparent and regulated environment for trading commodities, facilitating price discovery, risk management, and efficient transactions.

Types of Tradable Commodities:

·         Agricultural Produce: Agricultural commodities are products derived from farming activities. They include crops, livestock, and other agricultural products. Examples of agricultural commodities include grains (wheat, corn, rice), oilseeds (soybeans, sunflower seeds), livestock (cattle, poultry), dairy products, fruits, and vegetables. These commodities are traded on commodity exchanges, and their prices are influenced by factors such as weather conditions, supply and demand dynamics, and government policies.

·         Solid Minerals: Solid minerals refer to naturally occurring inorganic substances found in the earth's crust. They include minerals such as gold, silver, copper, iron ore, coal, limestone, and various precious and base metals. Solid minerals are essential for industrial processes, construction, and energy production. Commodity exchanges facilitate the trading of solid minerals, allowing buyers and sellers to trade standardized contracts based on their quality and quantity.

·         Oil and Gas: Oil and gas commodities refer to hydrocarbon resources extracted from the earth. Crude oil, natural gas, and petroleum products such as gasoline, diesel, and liquefied petroleum gas (LPG) fall under this category. These commodities play a crucial role in energy production, transportation, and various industrial processes. Trading of oil and gas commodities takes place on commodity exchanges, where standardized contracts based on quantity, quality, and delivery terms are bought and sold.