What is Commodity Prices-Factors Affecting Demand and Supply of a Commodity

Commodity trading is not a new phenomenon in India; it has a long history from the olden days. Bombay cotton Trade association, India‘s first organized trading in commodities which was stated in 1875.India had a vibrant futures market in commodities till 1960,then it was discontinued due to war, natural calamities and the consequent shortages. In 2002, Indian Government approved for futures trading in commodities, Commodities Futures exchange re-emerged. National Commodity and Derivatives Exchange Ltd (NCDEX), Multi commodity exchange (MCX) and National Multi commodity exchange (NMCE) formed for commodities futures trading respectively.MCX is India’s leading and largest commodity exchange in India which has market share of 83 % in India s commodity trading. The primary benefits from commodity futures markets are informed production, storage and processing decision. The essence of Price discovery function is to establish a reference price from which the spot market can be derived and hinges on whether new information is reflected first in changed futures prices or in changed cash prices. The futures price serves as the market’s expectation of subsequent spot price (Black .1976).

Commodities are considered as separate asset class. Commodity derivatives are a very useful tool to obtain economic exposure to commodity asset. Commodity futures are one of the derivatives contract. A derivative is a product whose value is derived from the value of one or more underlying variables or assets in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. Commodity futures contract helps to gain exposure to Commodity Price. A futures contract is a contract to buy or sell a pre-determined amount of certain standardized commodity at a pre-determined futures date at a pre-agreed price.

Factors Affecting(Influencing) the Prices of Commodities in futures market

Metals and Energy prices

a) Supply side influence:

•          Data- daily / weekly warehouse stocks data
•      Supply disruptions- miners’ strike, natural calamities
•      Government policies by key producing nation

b) Demand side influence:

•        Key economic data from G-7 countries: co-relation with USD
•        Government policies by key consuming nation
•        Geo-political climate

Agri commodity prices

• Supply and demand
• Peak Harvesting and arrival season.
• Spot market sentiments
• Monsoon fluctuations
• Fluctuation in production / consumption
• Incidence of pest and diseases
• Export / Import
• Government policies (subsidy, market intervention, change in duties)
• Crop failure/bumper production in foreign/domestic market.

commodities meaning
what is commodity market
commodity product
list of commodities
commodity in a sentence
commodity trading meaning
commodity examples
characteristics of a commodity
us dollar index
commodities trading
moneycontrol login
mcx live market watch on mobile
commodities definition
commodity market live
commodity online
silver moneycontrol
what is commodity market
commodity stocks
list of commodities
mcx live rates software free download
commodity news in hindi
commodity market tips
dow jones live futures
is water a commodity
commodity trading meaning
commodity in a sentence
commodity examples
is gold a commodity
commodity market news
opposite of commodity
commodity hardware meaning
commodity synonyms
is money a commodity
commodities examples
what are commodity
stock price of silver
market insider bitcoin
what causes commodity prices to rise and fall
why commodity market is going down
factors affecting commodity prices
what happens when commodity prices fall
how to pronounce commodity
commodity prices meaning in hindi
world commodity definition
commodity prices examples
comonities
gold vs dollar chart 2018
money control live commodities
effects of a rise in commodity prices
list the three qualities of a commodity
why are commodity prices falling 2018
volatility of commodity prices economics

factors affecting demand of a commodity factors affecting supply of a commodity

Share on Google Plus

About sathish.mohan

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.