An introduction to the prices of primary commodities

Because of the perishable nature of certain commodities or their bulk and high storage costs, however, a buffer stock is not always feasible. Often, however, the transmission of growth to the nonexporting sector of the economy is impeded in less-developed countries by the economic, social, and political organization of the economy.

A commodity can be a metal, agricultural product and can also be natural resources. Price movements Prices usually vary widely in commodity markets, not only in the short run but also in the long run.

Investors have started exploring other investment opportunities apart from traditional investments. Tree crops, for example, need a long growth period, and mineral reserves are tapped only if expectations about the price trend are favourable.

Many countries have their own markets: The prices are freely and competitively derived. When a minimum or a maximum price is reached or approached, efforts are made to ensure that prices remain within the two limits.

When there is a surplus, the producers restrict their exports or production; when there is a shortage, quotas are allotted to the consumer countries. More Information Primary commodities — food, raw materials, fuels and base metals — continue to be a substantial proportion of the exports of many developing countries and account for over 40 per cent of world trade.

This article gives the user a basic introduction to commodities, one of the other alternatives in the hands of investors. These problems make it extremely difficult to generalize about the effects of commodity price changes on the economic situation of one or a group of countries.

See Article History Alternative Title: These factors explain the unsatisfactory results of many national price agencies.

Commodity trade

In the case of sugar and wheatdemand is fairly stable, but supply is not; as regards tinand, indeed, the majority of metalsthe converse is true. Each of the three systems achieves this in a different way. In the multilateral contract system, consumers and producers undertake to buy or sell a specified quantity of the commodity at agreed minimum and maximum prices, or at a price within the agreed range.

The countries selected, the relative weight assigned to the various goods, changes in transport costs, and the fact that the quality of manufactured goods has improved much more than that of primary goods make the statistics unreliable.

Primary commodity market

During its early years, it was notably unsuccessful: Although commodity agreements may contribute to this, their relatively limited success has caused other proposals to be advanced.

It would in fact be undesirable, because in the long run supply and demand need to remain in equilibriumand the necessary adjustments in the economies concerned must not be precluded.

Commodities and commodity markets are terms used as synonyms for primary goods and the markets in such goods. Market conditions differ, of course, from product to product. The increasing industrialization of India, China and other emerging markets has driven a strong demand for commodities globally.

Commodities 101: Introduction to Commodities

Such factors include the type and destination of exports and, above all, the economic policies of the countries concerned. As a rule, price changes do not give rise in the short run to substantial changes in the supply of or demand for primary goods low elasticity of supply and demand.Commodities and commodity markets are terms used as synonyms for primary goods and the markets in such goods.

Primary commodity markets Trade in primary goods may take the form of a normal exchange of goods for money as in any everyday transaction (referred to technically as trade in “ actuals ”), or it may be conducted by means of.


An Introduction to Key Global Markets. Kellogg's would be comparing the prices of grains inputs into its cereals. those primary commodities would mean a lower price for these primary commodities.

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An introduction to the prices of primary commodities
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