The Eco–System of Commodities
It is a symbiotic relationship among users, logistic support systems, and administrative and other support systems. In fact, the above-mentioned list is only a host of perceivable components that interact continuously to create efficient commodity exchanges. Among all the commodities like bullion, energy products, base metals, and agricultural products, we find the agricultural products have the highest number of producers and sellers in the market, and their day-to-day interaction and price determination have a direct bearing on the common man.
Salient Features of Exchange-Based Commodity Trading
- The price discovery mechanism leads to efficient pricing.
- Price risk management facilities transfer risk
- Increased investment opportunities.
- Facilitation of physical trade links with the futures market is established.
- More sophistication comes in the market by harnessing technology
- Market development and capacity building achieved.
- Facilitation of warehouse receipt / Agricultural Product financing
- Exchange-based trading in standardized contracts – leads to the development and adoption of uniform industry standards and grades of quality of all the traded commodities.