• Wed
  • Jul 23, 2014
  • Updated: 11:15am

BUSINESS TALK

PUBLISHED : Wednesday, 06 June, 2007, 12:00am
UPDATED : Wednesday, 06 June, 2007, 12:00am

Commodities : Something that is traded in large quantities, often an agricultural or mining product that can be processed and resold. Copper, oil, grain and rubber are all commodities.


Inventories/stockpiles : Commodity prices are driven by supply and demand, and when dealing with a physical product, this is very apparent. For some commodities, such as copper, inventories are carefully tracked by the exchanges. For others, such as rice, there are experts that do their best to guess how much of that commodity is being kept in storage around the world. These are literally piles of rice kept in warehouses. In both cases, the size of the global stockpile in a certain commodity is a key factor in its price.


Delivery : You may have read that, for example, 'oil, for February delivery', is at a certain price or have heard some other commodity price quoted in relation to a delivery date. Futures are contracts between a buyer and seller for a product to be delivered at a future date. Therefore, prices for the commodity change depending on when the seller has promised to deliver the product. This matters because price changes according to supply. For example, corn for delivery in October, right after harvest season, should generally be cheaper than corn for delivery in August, when much of the annual crop has already been used.


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