A commodities market overview

Those of us who didn’t get the chance to be a part of the hectic activity of a Stock Exchange trading pit, where screaming brokers and dealers interacted, we don’t pay much attention to the history of trading activity. After all today, everything is done electronically.

In 1992 the FIX protocol was introduced and globally adopted by commodity exchanges including the Chicago Board of Trade, the world’s oldest futures exchange going back to 1848, in the year 2001.

Further than that, trading electronically developed the Alternative Trading System, that allowed transactions without a dealer facilitating the deals.

A commodities exchange is an exchange where various commodities and derivative products are traded. The contracts offered by the exchange can include spot prices, forwards, futures and options on futures.

Trading involves contracts and is done through:

Spot – immediate delivery or in very short time frame
Forwards – pre agreed price, future delivery date and quantity
Futures – same as Forwards, but through a futures exchange

Few of the largest commodities exchanges in the world are:

Chicago Mercantile Exchange (USA)
Tokyo Commodity Exchange (JAPAN)
NYSE Euronext (USA)
Dalian Commodity Exchange (CHINA)
Multi Commodity Exchange (INDIA)
Intercontinental Exchange (USA, Canada, China, UK)

Examples of traded commodities

Crude Oil and derivatives – The most commonly traded commodity is Crude Oil, and its various derivatives such as heating oil and gasoline. These commodities are mostly traded in the New York Mercantile Exchange [NYMEX], ICE Futures, the Dubai Mercantile Exchange [DME] and the Central Japan Commodity Exchange [C-COM].

Coffee – The second most traded commodity is Coffee [value wise]. Coffee is mainly traded through the New York Board of Trade [NYBOT], the Kansai Commodities Exchange [in Osaka, Japan], the Singapore Commodities Exchange [SICOM] and Euronext [London].

Agriculture – Common commodities in agriculture include wheat, corn, maize, oats, rice, soybeans and they are traded in the Chicago Board of Trade [CBOT], the Kansai Commodities Exchange [in Osaka, Japan], the Risk Management Exchange [RMX-in Hannover], the Minneapolis Grain Exchange, the Winnipeg Commodity Exchange [WCE], The Tokyo Grain Exchange [TGE] and Euronext.

Animals and Animal Products – Animals and animal products such as live and feeder cattle, beef, frozen and fresh pork bellies, and eggs are mainly traded in the Chicago Mercantile Exchange [CME], Euronext, the Risk Management Exchange [RMX-in Hannover] and the Central Japan Commodity Exchange [C-COM].

Cocoa, Butter, Orange juice and Sugar – Items like cocoa, butter, orange juice and sugar are also commonly traded in the New York Board of trade [NYBOT] and Euronext.

Metals – Metals such as aluminum, nickel, copper, lead and ferrous scrap are mainly traded in the New York Mercantile Exchange [NYMEX], the London Metal Exchange [LME], the Shangai Futures Exchange [SFE], the Central Japan Commodities Exchange, Hedgestreet Exchange [in California], and the Tokyo Commodities Exchange [TOCOM].

Precious Metals – The other commonly traded commodities are precious metals such as gold, silver and platinum and they are traded in the New York Mercantile Exchange [NYMEX], the Brazilian Mercantile and Futures Exchange [BMF], the Dubai Gold and Commodities Exchange [DGCX], the National Commodity Exchange Limited [in Karachi, Pakistan] and the Tokyo Commodities Exchange [TOCOM].

Plastic – Plastic is traded in the London Metal Exchange [LME] and the Dalian Community Exchange [DCE-China]
Natural Gas – Natural gas is traded in the New York Mercantile Exchange [NYMEX] and ICE Futures.

Bio-fuels – Bio-fuels is another upcoming commodity and is now being traded in the Brazilian Mercantile and Futures Exchange [BMF], the Bursa Malaysia [MDEX], the Chicago Board of Trade [CBOT], the Chicago Mercantile Exchange [CME] and the New York Board of trade [NYBOT]. These exchanges have now identified the key commodities, which are available in their region or are required there and hence have started specializing in trading in them.

Exports of top traded commodities

Souce: International Trade Center

Rank Commodity Value (USD) Up to
1 Mineral fuels, oils, distillation products, etc. $2,183,079,941 2012
2 Electrical, electronic equipment $1,833,534,414 2012
3 Machinery, nuclear reactors, boilers, etc. $1,763,371,813 2012
4 Vehicles other than railway, tramway $1,076,830,856 2012
5 Plastics and articles thereof $470,226,676 2012
6 Optical, photo, technical, medical, etc. apparatus $465,101,524 2012
7 Pharmaceutical products $443,596,577 2012
8 Iron and steel $379,113,147 2012
9 Organic chemicals $377,462,088 2012
10 Pearls, precious stones, metals, coins, etc. $348,155,369 2012