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Commodity Exchange to Stabilize Volatility of Prices of Ago – Products

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Commodity Exchange to Stabilize Volatility of Prices of Ago – Products.
Speaker: Mr. Wali-ul-Maroof Matin

  • My Name is Mrs Awa SISSOKO I'm a contract agent to Humanitarian Organization here in Mali looking for a capable company that will come into food contract with this Humanitarian Organization. They normally purchase foodstuffs in big quantity once every year on CIF monthly delivery basis. So let me know if your company is capable to handle the rice contract. Name of Item: LONG GRAIN WHITE RICE. Specifications: 5% Broken Monthly delivery: 12500 MT Bulk Shipment X 12 Packing: 50 kg Bag. Payment Terms: 100% Upfront By T/T. In 2 Installments 70% after signing Of contract and confirmation of sample, 30% after bill Of lading. Our representative may accompany the seller back to witness the shipment. Contract Period: 12 months contract supply. Shipment: Contract delivery of Cif based on the signed contract. Delivery port: Republic of Togo Lome Sea Port, West Africa.
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Commodity Exchange to Stabilize Volatility of Prices of Ago – Products

  1. 1. Commodity Exchangeto stabilize volatility of agro-product Wali-ul-Maroof Matin Member, CARES
  2. 2. Philosophy firstPhilosophy first• Capitalism or Market Economy• Laissez Faire vs Regulated Competition• Price Fixation vs Price Discovery Committee of Action for Research, extension and Services, July 2012
  3. 3. Define Commodity andCommodity Exchange• A Commodity is a product which has a commercial value. It can be produced, bought, sold and consumed.• A commodities exchange is an exchange, just like any Stock Exchange where various commodities and derivatives products are traded. Most Commodity Exchanges across the world trade in agricultural products and other raw materials• To be traded on an Exchange must meet certain specification regarding self life, quality standard, demand and supply and some more. Committee of Action for Research, Extension and Services, July 2012
  4. 4. Time dimension of markets Committee of Action for Research, Extension and Services, July 2012
  5. 5. History:History:market isnatural developmentmarket is a a naturaldevelopment• First organized futures market Osaka Rice Exchange – 1730• First organized futures trading in US, Chicago Board of Trade – 1848• Standardized Futures Contract in US – 1865• The Chicago Butter and Egg Exchange – 1898. This Exchange evolved into Chicago Mercantile Exchange in 1919. The number one now. Committee of Action for Research, extension and Services, July 2012
  6. 6. Some importantCommodity Futures ExchangesExchange Main ProductsChicago Board of Trade (CBOT) Wheat, Corn, Soybean, Soy Oil, Mini Gold, Mini Silver, Live Cattle, Pork Belly, EthanolNew York Board of Trade (NYBOT) Sugar, Cotton, Coffee, Cocoa, Orange Juice, EthanolNew York Mercantile Exchange (NYMEX) Light Sweet Crude Oil, Gasoline, Heating Oil, Gold, Silver, Platinum, Palladium, Copper, ElectricityIntercontinental Exchange Brent crude, light sweet crude, gasoline, Natural Gas, Coal, ElectricityBursa Malaysia Berhard Crude Palm Oil, RBD palmoleinDubai Gold & Commodity Exchange Gold, Silver, Steel, Freight rates, Cotton(DGCEX)Multi Commodity Exchange, India Gold, Silver, Energy, Agricultural Products Committee of Action for Research, Extension and Services, July 2012
  7. 7. Trading in Commodity Futures isalmost similar to trading in stocks• Trading in Commodities and that in stocks both require you to research the stock or commodity that you plan to trade in and in both cases you need to have the capital to invest.• In both cases, the Exchanges help to mitigate risks of trading as they stand as surety for the trades that take place via their Systems Committee of Action for Research, Extension and Services, July 2012
  8. 8. The Ecosystem Logistics Companies USERS SUPPORT AGENCIES Storage & Transport Requirements Quality Certification RequirementsFarmers & Farmer Cooperatives Public (Hedgers) Testing & Certifying Companies Warehouses Investors Spot Markets Private Sector (Speculators) Warehousing info Companies Traders Commodity Exchange (Arbitrageurs) Warehouse Receipt System Commodity Information Lending Agencies Committee of Action for Research, extension and Services, July 2012
  9. 9. Benefits of Commodity Futures trading• Balanced investment portfolio management• Transparent and fair price discovery• Platform for risk management• Helps to improve cropping patterns• Assures hedgers fixed prices• Inventory management• Replace minimum support prices as a mean of hedging• Means of implementing food security• Security against default• Standardization of commodities Committee of Action for Research, extension and Services, July 2012
  10. 10. Inverse relation between commodity and stock prices• Raw material form a key element. The increase in raw material cost increases overall input costs and weights down the earning for most companies. This adversely impacts the share price of the company. Steel Construction Committee of Action for Research, Extension and Services, July 2012
  11. 11. Players in Commodity Exchange Committee of Action for Research, Extension and Services, July 2012
  12. 12. Farmers’ risks• Production risk – Adverse weather – Pest• Price Risk – Domestic Demand Shock – Too much of production – Manipulation by middlemen Committee of Action for Research, extension and Services, July 2012
  13. 13. Price & Sowing Decisions Committee of Action for Research, extension and Services, July 2012
  14. 14. Trading and Settlement 6 6 SELLER Bank 1 Bank 2 BUYER 1 1 2 2 5 5 EXCHANGE 3 3 Matching Engine 4 Unmatched orders pending in the system Committee of Action for Research, extension and Services, July 2012
  15. 15. Delivery Mechanism 2 5 SELLER Warehouse BUYER 1 5 5 4 4 3 EXCHANGE 3 Intent 3 Matching for delivery 3 Willingness Default X% on due date rate 6 7 7 Unmatched orders pending in the system Open short and long positions not marked for delivery will be settled at the due date rate Committee of Action for Research, extension and Services, July 2012
  16. 16. SEC’s ( Regulator) roles: Approve, and regulate Exchanges Oversee the risk management Promote the business as whole Bring manipulation attempts to justice Committee of Action for Research, Extension and Services, July 2012
  17. 17. Committee of Action for Research, Extension and Services, July 2012
  18. 18. Thanks for your patience Committee of Action for Research, extension and Services, July 2012

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