Emerging Trends in Commodity Trade and Their Implications

By

ACKNOWLEDGEMENT

I would like to take this chance for thanking my research facilitator, friends & family for support they provided & their belief in me as well as guidance they provided without which I would have never been able to do this research.



DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, & this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views & not essentially which are associated with university.

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ABSTRACT

This report analyzes the integrated optimization of procurement processing and trade of commodities and the dynamic risk management of commodity operations. This report further analyzes the commodity operations in partially complete markets and the commodity operations in a network environment. Libraries including online databases are accessed to get the most relevant and updated literature. Some of the online databases that are used include: EBSCO, Emerald, Blackwell, etc. The main conclusive data are the result of a thorough analysis of the material found online. This report concludes that profits for commodity processing firms are affected by changes in both input and output commodity prices. Typically, such firms have little influence or control over the prices of these commodities which are driven by global supply and demand shocks and determined by trading activities on global exchanges and spot markets. Research shows the importance of coordinating procurement, processing and trade decisions in the face of commodity price uncertainty, to maximize expected profits. This report also deals with the impact of risk aversion in managing commodity price uncertainty. However, many firms are interested in not just maximizing expected profits but also managing the risk in operations, because an adverse change in commodity prices can greatly impact the firm's profitability and viability. The main insight from the analysis in the report is that operational capacity constraints affect how firms interpret price information from commodity markets. The findings in this paper could help in understanding better the market structure of commodity futures, the influence of volatility and the respective roles of hedgers and speculators.

Table of contents

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 01: INTRODUCTION1

Aims and objectives of the Study1

Research Questions2

Outline of the Study2

CHAPTER 02: LITERATURE REVIEW4

Optimization of Procurement of Commodities4

Optimization of Processing of Commodities5

Optimization of Trade of Commodities7

Risk Management of Commodity Operations8

Dynamic Risk Management of Commodity Operations9

Risk Averse Decision Making10

Trade off the Risk12

Operational Hedging13

Hedging and its Benefits14

Complete Markets and Commodity Operations15

Commodity Futures15

Commodity Futures and Price Volatility17

Prices Shocks in Future18

Futures and Volatility19

Demand for Futures20

Effect of Futures on Commodity Prices21

Scope of Commodity futures23

Futures and Options24

Different Markets25

Expected Differences in the Two Markets27

Liquidity Costs in Futures Options Markets28

Measures of Liquidity Costs30

CHAPTER 03: RESEARCH METHODOLOGY33

Research Methods33

Qualitative Research Method33

Quantitative Research Method34

Comparisons of the Qualitative and Quantitative Methods of Research34

Research Design36

Search Technique37

Advantages of Secondary Research39

Disadvantages of Secondary Research39

Inclusion and exclusion criteria39

Ethical Consideration40

CHAPTER 04: DISCUSSION41

Processing and Trade of Commodities41

Optimization of Procurement42

Risk Management in Commodity Operations43

Dynamic Risk in Commodity Operations44

Commodity Operations and its Scope45

Complete Markets47

Complete Markets and ...