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