What Is a Commodity Market?

A commodity market is a marketplace for buying, selling, and trading raw materials or primary products. There are currently about 50 major commodity markets worldwide that facilitate trade in approximately 100 primary commodities. The trading of commodities normally exceeds $75 bilion anually. Prices of commodities are established on the nation’s commodity exchanges. These exchanges affect not only producers, merchandisers and processors but also inventory values, domestic consumer prices and world commodity prices.

Types of Commodity Market

The commodity market can be categorized under two major categories based on the
type of commodity. These two categories are:

– Hard Commodities
Hard commodities consist of the commodities that are required by the manufacturing
industries such as metal ores, oil reserves, gold, silver, rubber, copper, etc. They form the basis of the economic health of a country, and global demand for such resources can be monitored to gauge the future stability of an economy.
– Soft Commodities
Soft commodities consists of products that must be grown and cared for, such as agricultural produce, livestock, and related primary products. . Soft commodities are best understood as grown commodities that include coffee, cocoa, orange juice, sugar, canola, corn, lumber, wheat, lean hogs, feeder cattle, etc

Commodity Market Regulators

With the maturity of commodity markets in different parts of the world, the size of daily trading across commodity market platforms has risen substantially with time over the past two decades. We manage commodity derivatives, but not the underlying physical markets. We also supervise certain firms and market operators active in commodity derivative markets.
We work closely with our regulatory counterparts and with physical market
authorities. Our goals include the promotion of competitive and efficient futures
markets and the protection of investors against manipulation, abusive trade practices, and fraud. Commodity Market regulators were designed to promote competitive, efficient, and transparent markets that help protect consumers from fraud and unscrupulous practices

The functions of the Commodity Market Regulators are as follows:

  • To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act.
  • To make recommendations generally with a view to improving the organization and working of forward markets.
  • To undertake the inspection of the accounts and other documents of any recognized association or association or registered association or any member of such association whenever it considerers it necessary.