Commodities Markets Intro
- 02:03
Learn the main traded commodities as well as where they are traded
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Glossary
CBOT CME COMEX Hard Commodities Soft CommoditiesTranscript
Let's have a brief look at the commodity markets. As you all know, a commodity is a basic good, and it's often used to produce other goods. And these commodities are traded in markets, and in those markets, the commodities have been standardized, so they're essentially uniform, and therefore they're interchangeable with other commodities of the same type. So that basically means that one pork belly is much the same as any other pork belly, so it's been standardized, so it can be traded. We typically think of two types of commodities, soft commodities. Those are things that are usually grown. Coffee, sugar, corn, cotton, pork bellies, live cattle, orange juice, et cetera, et cetera. Those are soft commodities. And then of course, we have hard commodities. Things are mined, generally speaking, can be things like oil, rubber, gold, silver, gas, other metals, all kinds of things that are mined. The players in the commodity markets are principally of two types. First of all, you'll have hedgers. Hedgers are those that are natural buyers or sellers of commodities. So a natural buyer, for instance, would be someone who uses a specific commodity in their production, and a natural seller would be someone who harvests or mines a specific commodity. You will have speculators, investors that are simply buying or selling in order to make a profit from price movements. There are a number of major commodity exchanges out there, for example, CME and CBOT, where you can trade cattle, hogs, milk, cheese, butter, and things like that. You have NYMEX and COMEX where you can trade coal, oil, gas, copper, gold. But there's also regional exchanges, for instance, in America, in Memphis, you can trade cotton. In Minneapolis, you can trade grain, and of course we have international exchanges such as the London Metal Exchange ICE and MCX.