What is Commodities ?
Commodities are tangible goods that are relatively easy to trade, can be delivered physically, can be stored for a certain period of time and can be exchanged with other products of the same type, which investors can usually buy or sell through futures exchanges. More universally, a commodity is a traded product, including foreign currencies, financial instruments and indices.
The characteristic of Commodities is that prices are determined by market supply and demand, not determined by dealers or sellers, and these prices are based on the calculation of the prices of each actor. Commodities, for example, are (but are not limited to): minerals and agricultural products such as iron ore, oil, ethanol, sugar, coffee, aluminum, rice, wheat, gold, diamonds or silver, but there are also so-called "commoditized" products (no longer differentiated based on brand) such as computers
In linguistics, the word "Commodity" began to be known and used in England in the 15th century, which comes from the French "commodité" which means "something that pleases" in quality and service.
In Latin, it is called commoditas which refers to various methods for the exact measurement of something; suitable time conditions and circumstances, good quality; expertise to create something or property; and added value or profit.
In Germany it is called die ware, for example a product or object offered for sale.
In France it is pronounced "produit de base" after industrial labor, goods, or raw materials.
In Indonesia, it can be referred to as: merchandise, commercial goods, or raw materials that can be classified according to quality according to international trade standards, for example wheat, rubber, coffee.
Commodity Trading.
Risk in Commodity trading, not only from default, is caused by price fluctuations. Prices are largely determined by supply and demand in the Commodity market. Demand is determined by population growth, usage increases, new uses and causes of substitution. Offers change due to increased production capacity (area of land planted or new factories formed), season, good or bad weather, bans or government incentives, natural disasters or war or peace. So there are many unpredictable aspects. It is this matter that urgently emerges the need for hedging. The need for hedging is fulfilled by making contracts outside and inside the Exchange. Initially the need for hedging was only experienced in the trading of agricultural commodities, but over time this need was felt for all various Commodities, including financial Commodities, weather, economics, banking and so on. For all that, a contract is drawn up. Some of these contracts are traded on an exchange which is already called the Commodity Exchange, even though it is actually called the Contract Exchange.
Commodity contract trading is tested on commodity exchanges (contracts) in various countries, for example in:
- The London Commodity Exchange, currently known as Euronext LIFFE
- New York Board of Trade (NYBOT)
- The Chicago Board of Trade which has now been merged with the CME
- Winnipeg Commodity Exchange
- London Metal Exchange
- Chicago Mercantile Exchange
- Multi Commodity Exchange of India
- Jakarta Futures Exchange( Jakarta Futures Exchange- JFX)
- Indonesian Commodity and Derivatives Exchange( BKDI)( Indonesian Commodity and Derivatives Exchange- ICDX)