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Iceni Magazine | September 16, 2020

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6 Interesting Facts About Commodities Trading

6 Interesting Facts About Commodities Trading

Commodities trading has its roots in the ancient world. Over the millennia societies evolved from bartering items to buying and selling on electronic exchanges.

In this article we will take a look at some of the more interesting aspects of commodities trading.

The first modern futures contracts were offered over 170 years ago

Futures and forward contracts are so common that it is hard to think of a time when they were not available. However, forward contracts were first offered by the Chicago Board of Trade (CBOT) in 1848. Over a decade later, CBOT began offering futures contracts.

These allowed traders and businesses to speculate on or hedge against the future prices of commodities and other assets.

In 2007, CBOT merged with the Chicago Mercantile Exchange (CME), which, in 2002, became the first American exchange to go public.

Source: CME Group

In 2019, the United Kingdom exported over £65 billion worth of goods to Commonwealth countries

Over 70% of exports to Commonwealth countries ended up in Australia, Canada, India, Singapore, and South Africa.

Source: House of Commons Library

The demand for agricultural commodities will rise dramatically

Between 2000 and 2016, there was a threefold increase in the value of agricultural trade. Experts say that there will need to be a 50% increase in the production of food, feed, and biofuels by 2050.

The prices of such commodities are also likely to be impacted by climate change, which will disrupt production levels and supply chains.

Source: FAO

By 2050, the world will be producing more than twice as much electricity as today

As the world’s population grows, the demand for energy will go up. This should lead to an increase in the supply of electricity available. In 2018, the world produced 20 trillion kWh of electricity. By 2050, experts estimate that the amount produced will more than double to 45 trillion kWh.

One major change, however, is that the amount of electricity generated from renewable sources should increase by over 20%, while electricity generated from coal-fired sources should decrease by 13%.

Source: EIA.gov

The production of green technologies will increase demand for particular metals and minerals

Whenever metals trading is mentioned, people tend to focus on precious metals, such as gold and silver. However, there are other critically important metals.

As more countries tackle climate change by switching to renewable energy, the demand for metals and minerals (such as aluminum, copper, lithium, silver, steel, and zinc) will increase. These materials are required for many of the low-carbon technologies in use today.

Source: World Bank

The Coronavirus pandemic will have lasting effects on commodities markets

The prices of many commodities were negatively affected by the global COVID-19 pandemic. The UNCTAD’s Free-Market Commodity Price Index (FMCPI) lost over 20% of its value in March 2020. Up until then, the biggest month-to-month decrease was 18.5% during the 2008 global economic crises.

What’s more troubling is that some commodities markets may be permanently affected due to persistent negative effects due to supply chain disruptions.

Source: UNSTATS and World Bank

Summary

For many people, commodities markets seem distant to their lives — or even mysterious. In this article, we’ve taken a brief look at some stats and stories that have, hopefully, made these essential markets more accessible and interesting.


 

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