Commodity Exchange 101

Welcome to the first instalment of Commodify Me! – the blog covering everything and anything to do with the commodity exchange.

Before I begin analysing the issues facing commodities  in the current recession, I think it would be best to cover the basics – i.e. what is the commodity exchange and how it operates.

In essence, the commodity exhange is a group of regulated and organised global markets where commodities  (CLICK HERE to see a full list of traded commodities) are bought and sold by traders, both locally and internationally.

Commodities are generally traded through futures contracts. These contracts are traded on the futures markets.

A good exmaple of how futures contracts and the futures markets work can be found here

The prices of commodities are influenced by supply and demand. In other words, commodity prices aren’t set, meaning they flactuate daily. This is often refered to as the market price.

So there we have it, a brief insight into the complex workings of the commodity exchange.

Hopefully that wasn’t too painful!