INTRODUCTION
A commodity can be broadly defined as “a physical product, natural resource, or chemical that an individual can touch, taste, smell, mine, grow, consume, or deliver” (Lind Waldock, 2011). Commodities are fungible, meaning they are considered equivalent even though they may come from different producers. Because there is little product differentiation, commodity prices are fundamentally driven by global supply and demand (S&P, 2011).
A. MAJOR CATEGORIES OF COMMODITIES
Commodities are tangible physical products that can be broken into three major categories: industrial and precious metals, agricultural products, and energy.
Industrial and Precious Metals
Metals are classified as either industrial metals or precious metals. Industrial metals include base and ferrous metals such as aluminum, copper, nickel, zinc, iron, steel, lead, titanium, cobalt, tin, etc. These physical goods are generally used as production inputs. Precious metals are those that are rare and have high economic value. Precious metals include gold, silver, platinum, palladium, etc. While precious metals can also be used in an industrial capacity, they are generally considered to have intrinsic value. The higher value is driven by many factors including rarity, uses in industrial processes, and as an investment commodity. Investing in metals can be done either by buying the physical asset itself or through futures contracts. Another way to trade in metals is to invest in companies that explore or produce these metals, such as miners. As the economic environment continues to be uncertain, investors have tended place their funds in precious metals because they have an inverse relationship with currency strength and serve as a hedge against infla...
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1. What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of credit analyst or bond holder.
The practice of trading and bartering of commodities has been around since the beginning of time. The concept of commodity chains was developed by Terence Hopkins and Immanuel Wallerstein in an attempt to understand the spread of capitalism and economic change. (Bair & Werner, 2011) The emergence of capitalism has brought about an anthropogenic phenomenon know as globalization as a means to create profit and in doing so altered competitive dynamics (Gereffi 1999). Globalisation of economies has lead to the construction of chains of production, distribution and consumption transcending borders across the world. Gereffi (1994) identified these chains as Global Commodity Chains, using them as a method to analyze the global economy.
Gold is a particularly volatile commodity that has not been traditionally hedged against price risk, but over the years many firms in the industry have adopted risk management strategies with great enthusiasm. Particularly zealous is the American Barrick Resources Corporation. The company embraced risk management and even incorporated it into one of its main business objectives. Over the years American Barrick has grown into a successful and fast-growing firm, however after discovering abundant ore deposits in a recently purchased mine the company is particularly exposed to price risk. The price of gold and interest rates are at historically low levels and American Barrick is unsure of how to proceed.
In a capitalist system, once an object emerges as a commodity that has been assigned
Generally, it is a plow or a tractor. That is to say, land and labor are shared with manufactured resources in order to produce the things that we need. These manufactured resources are called capital, which consists of machines, buildings, and tools. Additionally, capital consists of enhancement to natural resources, such as irrigation ditches. Money is used to buy factors of production – it is not a factor itself.
In this essay, I will conduct an economic analysis of the coffee bean market to explain how the short and long run affects price fluctuations, and whether or not government intervention should be used to stabilise prices to benefit the growers. The assumption of demand and supply is that as demand is increased, supply will need to increase to maintain the market equilibrium. Arguably the consumer has very little influence on the levels at which demand and supply operate at, though this is contested due to the fact that a product cannot be sold unless it is demanded(desired) by a consumer. Although increasing and/or decreasing either the demand or supply of a product creates a new market equilibrium, it is usually short lived and we expect
Commodity risk is the potential loss due to an adverse change in the prices of the commodity. These commodities
The company recognizes that it is subject to both market and industry risks. We believe our risks are as follows, and we are addressing each as indicated.
There are many famous precious materials that the everyday person knows of. Gold, silver and in more recent times platinum are all known for their scarcity and desirability. However it is a crystalline form of carbon, not a precious metal, which carries more prestige than all three of them together. The diamond. Ever since the Kimberly diamond rush began in 1866, diamonds have played a very distinct role in our society. We are taught from an early age on that diamonds are extremely valuable due to their unrivalled beauty and apparent rarity.
According to Kotler and Armstrong, “A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.” Product constitutes one of the four P’s of the marketing mix and entails both the physical products and also the services that comprise all the offerings of a company to the target market. Product can also be further sub-divided into two categories comprising; firstly consumer products and secondly industrial products. Consumer products are bought by final consumers for personal consumption. They can be broken down to tangible and intangible (services). Examples of tangible are laptops, cars, books, games. Examples of intangibles are insurance and haircuts.
Commodity is a fundamental item used by almost everyone. In the past, tea, tobacco, salt, sugar are considered as commodities. People use these commodities to exchange goods. T...
goods or services. This value is necessary because the economy needs to see that the
Ans. Commodity Finance means funding of the commodity trading. It is a type of trade finance where a company in the commodity market is funded by the investors to make maximum output and repay the loans to the investors when the exports of commodity begins. A commodity can include metals and mining (hard commodities), agriculture crops (soft commodities) and even energy.
As it was mentioned before one of the alternative types of investment is gold. Gold is the most popular precious metal in the world. The biggest advantage of investing money into gold is the fact that gold is a liquid asset which can be easily converted into cash. Laurent (2016, pp. 11-13) described that in the world exist
Remember to consider the cost of an investment against your expected return. Depending on how much your bank will charge in commission, you should avoid buying bonds, shares or ETFs in too small chunks.