Commodity Market Ppt
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Transcript of Commodity Market Ppt
COMMODITY MARKET
TEJASVEE CHAVAN 910307 NEHA GAIKWAD 910310BHAGYASHREE GAWADE 910311SHRUTI KOLI 910321PRIYANKA PHADTARE 910331PRIYANKA SHINDE 910341RUJUTA ZAJAM 910344
COMMODITY MARKET
A commodity refers to any good, merchandise or produce of a land that can be bought and sold. A “commodity” is an article or product that; •Is used for commerce,•Is moveable,•Has value,•Can be bought and sold,•Is produced or used as a subject in a barter or sale.
VALUE CHAIN
PRODUCERS
ASSEMBLERS
TRADER
PROCESSORS
DISTRIBUTERS
RETAILERS
CONSUMERS
PHYSICAL COMMODITY MARKET:
Traditional market.
Spot contract.
Settlement in cash.
Buyer can select and buy the specific commodity required.
FEATURES OF COMMODITY MARKET
•Setting up Mandis•Products•Participants•Trading•Price•Clearing, Delivery and Settlement•Regulation
DERIVATIVES A derivative is a financial instrument whose value
depends on or is derived from the value of an underlined asset
The underlined asset could be:• Commodity• Foreign exchange• Equity• Interest rate• Index• Weather• Pollution
Commodity derivative is a contract to either buy or sell a commodity at a certain time in future at a price agreed upon at a time of entering into the contract
TYPES OF DERIVATIVE
•FORWARDS•FUTURES•OPTIONS•SWAPS
DERIVATIVES ARE TRADED IN 2 DIFFERENT MARKETS
OVER THE COUNTER (OTC) MARKETS
EXCHANGES TRADED
• FORWARDS• SWAPS
• FUTURES• OPTIONS
OVER THE COUNTER
•Market conducted directly between dealers and principals.•No automatic disclosure of the price of deals.•Deals and traded instruments are not standardized.•Major OTC derivatives are forwards and swaps.
FORWARD
Highly Customise And Not Traded On Exchanges.Specified Future Date Is Called As Maturity Date The Parties That Agrees To Buy Is Said To Have Taken A Long Position.The Party That Agrees To Sell Is Said To Have Taken A Short Position.
COMMODITY SWAPS
•Swaps means an exchange•To exchange 2 different streams of cash flows which are dependent on the price of an underlined commodity.•A commodity swap is used to hedge against the price of a commodity.
EXCHANGE – TRADED DERIVATIVES
•Futures Common Terminology Used In Futures Contract:•Spot Price•Futures Price•Contract Cycle •Expiry Date •Delivery Unit •Basis •Margin
OPTION
An option is an agreement between two parties – one of whom is the buyer and the other is seller. An option gives the holder or buyer of the option the right. But not the obligation to buy or sell an asset at a known fixed price ( called the exercise price) at a given point in the future.
Two Types Of Option
•Call Option
•Put Option
Several Terms Used In The Context Of Option•Buyer/Holder/Owner•Seller/ Writer•Long Position•Short Position•Option Price
COMMODITY DERIVATIVES v/s FINANCIAL DERIVATIVES.
Risk Management ToolHedging MechanismDifference In Commodity Derivatives And Financial Derivatives In Terms:•Physical Settlement •Warehousing•Quality Of Underlying Assets
COMMODITY DERIVATIVES FINANCIAL DERIVATIVES
Commodity derivatives may be settled by actual deliveries.
Financial derivatives are only cash settles on the given day.
Quantity and quality differences exit. No quantity and quality differences exit.
Holding cost includes assaying, warehousing and insurance costs.
Holding cost normally consists of only interest costs.
Physical markets are seasonal in nature.
Financial markets are active throughout the year.
Factors impacting: Demand and supply Import – export regulations Government intervention
Factors impacting: Global and local economic conditions Performance of the entity Taxations structures.
Types Of Trader•Proprietary Traders• Market Makers•Scalpers•Day Traders•Position Traders
HEDGING
BASIC PRINCIPLES OF HEDGING
Hedgers are market participants who want to transfer risk. Hedgers include various sets of people such as , consumers, processors traders and producers.
HEDGING STRATEGIES
There are two main hedging strategies: •Short Hedge
•Long Hedge
SPECULATIONSPECULATION
BASIC PRINCIPLES OF SPECULATION Buying and holding shares is simpler than buying and holding commodities. However, speculating in the futures market of commodities is quite similar to speculating in financial markets
ARBITRAGEBASIC PRINCIPLES OF ARBITRAGE
Arbitrage involves the simultaneous purchase and sale of the same or similar asset in two different markets for different prices, leading to profits for the arbitrager
GLOBAL COMMODITY EXCHANGES
Oldest commodity exchanges in the world :1. Chicago board of trade (CBOT)2. Chicago mercantile exchange (CME)
AFRICA ASIA LATIN AMERICA
SAFEX China BrazilZIMACE Malaysia Argentina
Taiwan MexicoIndonesiaSingaporeThailandIndia
COMMODITY EXCHANGES IN DEVELOPING ECONOMY
FMC
COMMODITY EXCHANGES
REGIONAL EXCHANGE
NATIONAL EXCHANGES
NBOT 20 Other Regional ExchangeMCXNMCENCDEX
FUNDAMENTAL ANALYSIS OF SUGAR
SUGAR SEASONS: October-septemberGlobal Demand ScenarioGlobal Supply ScenarioPricing Pattern Of Sugar-global ScenarioIndian ScenarioDemand Scenario
SY 2000 2001 2002 2003 2004 2005
NUMBER OF FACTORIES1. COOPERATIVES2. OTHERS
INSTALLED CAPACITY THOUSAND TONNES
3. COOPERATIVES4. OTHERS
PRODUCTION THOUSAND TONNES
5. COOPERATIVES6. OTHERS
CAPACITY UTIL%7. COOPERATIVES8. OTHERS
423251172
16,181
9,0697,112
18,20010,3697,831
112.5114.3110.1
436259177
16,820
9,2867,535
18,51110,4998,012
110.1113.1106.3
434250184
17,685
9,9857,699
18,5289,4089,120
104.894.2118.5
453269184
17,498
10,1827,316
20,14510,1649,981
115.199.8136.4
422235187
18,802
10,6948,109
13,5466,0157,531
72.056.292.9
400203197
18,985
10,6848,302
12,6914,6538,038
66.843.696.8
MozambiqueTanzania
ChinaMalawiZambia
IndiaUSA
SwazilandSouth Africa
EUThailandAustralia
Brazil
0 10 20 30 40 50 60
PER CAPITA CONSUMSTION 2006/07 est.
Kilograms Per Annum
Pakistan Auatralia
SADCMexico
ThailandUSA
ChinaEU
IndiaBrazil
0 5 10 15 20 25 30 35 40
TOP SUGAR PRODUCERS 2006/07 est.
Million tons
CubaColombia
South AfricaEU
IndiaGuatemala
SADCAustraliaThailand
Brazil
0 5 10 15 20 25
TOP SUGAR EXPORTERS 2006/07 est.
Million Tons