- 2 days ago
Category
🗞
NewsTranscript
00:01Commodities are a necessary part of business and play a significant role in global trading.
00:07Commodities are raw materials or agricultural products that can be bought or sold.
00:12They are traded on about 50 major commodity markets worldwide.
00:16Commodities are split into two types, soft and hard.
00:20Soft commodities are typically from agricultural sources,
00:24whilst hard commodities are generally mined or extracted.
00:27Here is the story of some of the top traded commodities in the world.
00:52Crude oil is a naturally formed substance
00:54found in or between sedimentary rocks under the Earth's surface.
01:00Land, sea or ice, it's been sought after by developed and emerging nations alike,
01:06as far back as the 4th century AD.
01:12The reason for this is down to its uses,
01:15and how it satisfies globally our round-the-clock consumption of goods and services.
01:21According to the International Energy Agency,
01:24some 93 million barrels are currently being consumed daily.
01:29That's a colossal 34 billion barrels a year.
01:34Over 60% of global oil production comes from the Middle East
01:39in countries such as Saudi Arabia, the United Arab Emirates,
01:43Qatar, Iraq and Kuwait.
01:50The other big production sites lie in the US and Russia.
01:54Many of these oil rich countries form part of a closely knit community known as OPEC,
02:00the organisation of the petroleum exporting countries.
02:06As the modern world expands, so does the need for the black stuff.
02:10In turn, crude oil and their countries of origin have a direct social and economic impact on societies globally.
02:20In fact, even though crude accounts for just 2.5% of world GDP,
02:27it represents over a third of humanity's primary energy supply.
02:32Industries that call on its uses are numerous too.
02:37Manufacturing, food, travel, construction, retail and technology
02:44are just some of the sectors whose thirst for oil is relentless.
02:49Crude oil comes in a variety of styles and names such as light, heavy, sweet and sour,
02:57all with their own viscosity and density.
03:02The most popular of these is light, sweet crude,
03:05because it takes less time to refine and therefore can be brought to market quickly.
03:12But in order to realise crude oil's full potential in today's world,
03:16it needs to be refined into specific products such as gas, petrol or LPG,
03:23otherwise known as liquefied petroleum gas.
03:28These may typically power cars, aircraft, industry machines
03:33or act as the main source of fuel for heating homes.
03:39Crude oil is also the most commonly traded commodity in the world.
03:44When buying or selling oil on the commodity market, as with any other commodity,
03:48it operates via a ticker symbol, contract value and margin requirements
03:54and will always be subject to global market forces.
04:00The price of crude oil can be affected by several factors.
04:04Firstly, being tied to a US dollar denomination means oil price changes
04:10are likely during currency fluctuation.
04:14Secondly, the price can be affected by the amount of actual crude oil in existence,
04:20its demand and supply and sentiment towards oil futures contracts.
04:26These are exchange-traded contracts where the buyer or speculator agrees
04:31on delivery of a specific quantity of crude oil at a predetermined price
04:36but on a future delivery date.
04:40Thirdly, the rise of alternative means to extract oil can also have an effect on prices.
04:47The future is not entirely secure for crude oil.
04:51Almost every aspect of life in the modern world will use the substance at some point.
04:56But this high usage has created other arguments related to pricing issues,
05:01oil reserve levels and, of course, global warming.
05:05So-called green technologies such as those used in electric cars,
05:10solar panels and fuel cells are currently in development.
05:14As these become more commonplace in the market,
05:18coupled with possible future supply and demand inaccuracies,
05:22the demand for crude oil may weaken enough for it to, one day, be displaced permanently.
05:36Gold, a precious metal, which has come to have a huge significance for humans
05:41for its allure and permanence.
05:44Gold can be found almost everywhere on our planet.
05:48China, South Africa, Russia, Australia, Canada, Peru
05:52and the United States collectively represent the backbone of global gold production.
05:59At the end of 2014, there are 183,600 tonnes of stocks in existence above ground.
06:06If every single ounce of this gold were placed next to each other,
06:10the resulting cube of pure gold would only measure 21 metres in any direction.
06:16Amongst all commodities, gold is unique due to its long-term storage of value.
06:21It is considered by many, from governments and financial institutions,
06:25to your average person on the street as a more secure investment option over a long-term period.
06:31Gold's value will rise or fall depending on supply and demand and the impact of market forces.
06:38Some key drivers include central bank reserves, worldwide jewellery and industrial demand, to name a few.
06:46Gold is often considered a safe haven.
06:49Central bank reserves are usually held in gold bullion, that is physical gold bars or coins,
06:54and are maintained in anticipation of natural disasters, economic crises or other emergencies.
07:01Central banks' gold buying is generally indicative of their outlook on the global economy.
07:07Gold is highly liquid, in other words, it can easily be traded or converted to cash,
07:12keeping it in great demand, and therefore acting as a strong safety net for investors.
07:18Amid the fallout from the world financial crisis of 2008,
07:22investors, including governments around the world, rapidly turned to gold as a means to preserve their wealth.
07:28According to a recent report by the World Gold Council,
07:31in 2014, governments increased their reserves by 477.2 metric tons,
07:37the second biggest increase in 50 years.
07:42The US dollar, which is closely linked to the price of gold, when strong, weighs heavy on metal prices.
07:49Like every commodity, gold has its own ticker symbol, contract value and margin requirements.
07:54It is traded in a variety of ways, including gold mutual funds, junior gold stocks, gold options and futures.
08:04Options allow you to speculate in gold prices.
08:12Gold is sold in terms of carats, carat denoting the purity of the precious metal.
08:1724 carats is considered 100% gold.
08:21Jewelry hit the top spot at the end of 2014, way ahead of the other usages of gold stocks.
08:27It's the most common way gold reaches consumers.
08:35Possession of gold is a tradition firmly held in many cultures worldwide,
08:40and none more so than in South Asia, the Middle East and China,
08:43where the jewellery market is prolific.
08:47India is a good example of where all that glitters is usually gold.
08:51The country has an estimated 20,000 tons of the stuff, or around US$700 billion worth held by individuals,
09:00making it the world's largest consumer of gold and gold products.
09:05Growth spurts in purchase typically seen during Diwali, the October festival and the wedding season in November.
09:14Gold recycling is a multi-billion dollar industry.
09:1890% of recycling comes from high-value gold, mainly jewellery,
09:22and 10% from the component parts of various end-of-life electronics, including computers and mobile phones.
09:30Our increasingly technological era will bring an increased need to recycle gold.
09:36The amount of gold on the planet being finite will no doubt affect its market price in the future,
09:42and raise questions around ownership.
09:45Currently the US and Germany hold the most gold.
09:49Gold is highly revered.
09:52However, certain issues such as conflict and environmental damage from mining taint this precious metal.
09:59This commodity is generally considered an inflation-proof store of value in uncertain times,
10:04and as a result remains a key reserve asset.
10:19Whether it's cappuccino, mocha or latte, coffee is many people's wake-up call first thing in the morning.
10:26The increase of coffee houses in the Western world has become somewhat of a phenomenon,
10:31creating a social culture geared around this aromatic brew,
10:36which has become integral to our modern-day lifestyle.
10:40It is uncertain where coffee was discovered.
10:44However, it is thought to have come from Ethiopia,
10:46and was first cultivated by Arabs from the 14th century.
10:51There are no accurate figures,
10:54but it is estimated that around 2 billion cups of coffee are consumed every day globally.
10:59A more measured indicator of production and consumption come from statistics from the International Coffee Organization.
11:06Global coffee production in 2014-2015 was estimated at 143.25 million 60 kilogram bags,
11:17whilst coffee consumption globally in 2014 was estimated at 149.2 million 60 kilogram bags.
11:26For the year 2014-2015 total exports were 110.75 million 60 kilogram bags.
11:37There are over 100 varieties of coffee of which the majority are not grown in large enough quantities to become
11:45commercially successful.
11:46However, when it comes to your daily cup, only two varieties matter and lead the way in terms of production,
11:54business and consumption.
11:57Arabica coffee is considered more flavoursome and accounts for around 70% of the global market share.
12:05Robusta, second in the commercial stakes is harder, contains twice the amount of caffeine, is cheaper,
12:12so used primarily for blends and instant coffee.
12:16The major players in coffee production and export are Brazil, Vietnam, Indonesia and Colombia.
12:24However, other locations where large volumes of coffee beans are produced include Ethiopia, India, Honduras and Mexico.
12:35Over 90% of coffee production takes place in developing countries,
12:40where tens of millions of small producers depend on this commodity as their primary source of income.
12:46Coffee is a key cash crop, a vital source of export.
12:51Conversely, industrialised economies are the main consumers of this beverage.
12:57Coffee is big business globally, with an overall market of $173.4 billion,
13:04according to a 2012 study published by the International Coffee Organisation.
13:11After crude oil, green unroasted coffee is the second most valuable traded commodity.
13:18Popular destinations for trading coffee include the New York Mercantile Exchange,
13:22Tokyo Grain Exchange and the London International Financial Futures and Options Exchange.
13:28As a soft commodity, it is usually one of the more volatile commodities to trade and is prone to wild
13:35price fluctuations.
13:37Roasted coffee is a different product and is not traded like green coffee, but bought directly from a roaster, grocery
13:45stores or as a drink from cafes.
13:49Variables driving coffee prices up and down include changing weather conditions such as droughts and frost.
13:56This would likely reduce global supply and so increase price.
14:00Political instability. This generally pushes prices up.
14:06Speculation about production levels. With higher levels, this means a price drop and vice versa.
14:12The price of oil. This impacts on transportation costs.
14:19People drink coffee in good times and bad.
14:22But a deep recession in an economy is likely to see demand fall for all commodities, including coffee.
14:29As emerging markets like Brazil, Russia, India and China continue to increase their influence on world markets,
14:37and as the effects of globalisation continue, coffee prices are likely to see increasing fluctuations.
14:44According to experts in the field, the land suited to farming Arabica could drop by as much as 50%
14:51by 2050.
14:53Moving forward, coffee production is facing a wake-up call with climate change,
14:58the consequences of which will be serious for farmers, traders and coffee lovers alike.
15:14Copper is a chemical element and metal with a soft malleable structure.
15:19It has been a major part of our lives for over 10,000 years.
15:23In fact, as far back as 8,700 BC, copper has been mined and worked in regions all over the
15:32world.
15:34Large open pits are created as copper is extracted from the ground,
15:39and is most prevalent in countries or regions such as Chile, the European Union, the US and Japan, to name
15:47but a few.
15:48In 2014, Chile alone produced 5.8 million metric tonnes of copper from its mines,
15:55out of a total of 18,700 million tonnes produced by other copper-rich countries.
16:03Copper is considered mostly as an industrial metal, used in electrical appliances, the automobile and air industry,
16:11and of course, in modern construction.
16:15Copper is a highly versatile material, and one of the biggest benefits is its ability to conduct electricity.
16:23It has the best thermal and electrical conductivity of any commercial metal.
16:29But for an added bonus, it also has over 400 alloys, each with their own unique properties to suit multiple
16:37environments.
16:38These include, but are not limited to, brass, bronze, copper-nickel, and beryllium copper.
16:49But the process used to extract copper also produces a by-product called molybdenum,
16:55which is used to strengthen steel, an important building material,
17:00and another vital ingredient in society's infrastructure.
17:05Copper, therefore, becomes a much sought-after metal in today's industrial environment.
17:12High-speed trains such as the Japanese Maglev, the current fastest train in the world,
17:18would simply not achieve its speeds without the resolute support of copper and its alloy friends.
17:24Indeed, many high-speed trains contain approximately 20 tonnes of copper-containing components.
17:31Copper is traded on the commodity market in, predominantly, the New York Mercantile Exchange and the London Metal Exchange.
17:40Market players often use the COMEX division of high-grade futures and options to reduce price risks.
17:47According to the New York Mercantile Exchange,
17:50copper is the third most widely used metal in the world, behind iron and steel, and is infamous for its
17:57price volatility.
18:00This is caused, firstly, by the actual amount of economically viable copper left on the planet,
18:06and secondly, high demand from surging economies such as those in China and India.
18:13In fact, as demand for copper increases, some commentators predict that the total amount of copper humans are currently capable
18:20of extracting from the planet could run out in less than 50 years' time.
18:26Another reason for copper's price volatility is the close relationship it shares with the US dollar.
18:33Similarly, with crude oil, when the dollar is strong, copper prices often weaken,
18:38and because the commodity is traded all over the world, it becomes more expensive for holders of foreign currencies.
18:46This pairing with the dollar plays a major role, therefore, in deciding whether copper prices rise or fall,
18:52and thus, price volatility becomes a common occurrence for copper in the marketplace.
19:01Perhaps the most significant fact about copper is that it acts as a kind of barometer for the global economy.
19:07When prices fall, analysts often say global growth is slowing.
19:12When they rise, the opposite occurs.
19:16More recently, however, it's been used to gauge China's vast economy,
19:20as it accounts for roughly 45% of global demand and is also itself a world economic driver.
19:29However, as these big emerging countries continue to expand,
19:34so will a demand for the reliable supply of industrial metals and their alternatives.
19:40If this reliance continues, it could well mean that copper, so vital to industry and economic growth,
19:47enters a new era of uncertainty not just surrounding its market price, but its physical supply as well.
20:07Corn, also known as maize, is one of the most cultivated and profitable agricultural commodities on the planet.
20:14Often measured in bushels, corn is considered primarily as a source of food, but more recently has become a major
20:22ingredient in the production of fuel.
20:24A variety of theories claim to date corn's origins, but the most plausible is that it was derived from a
20:30wild grass by natives of central Mexico some 7,000 years ago.
20:35In 2012, total world production of corn was approximately 875 million metric tons a year,
20:43with three major corn producers, the US, China and Brazil, producing 31%, 24% and 8% respectively.
20:55Throughout 2015 and 2016, analysts predict corn production will reach similar lofty heights, hitting roughly 975 million metric tons per
21:05year.
21:10So why is this?
21:12In recent years, corn's presence in food has reached unimaginable levels.
21:17As knowledge and technology have improved, corn has taken on somewhat of an agricultural evolution.
21:23Corn syrup, made from corn starch, has become a vital, cost-efficient ingredient for big brands,
21:30such as those in the fast food industry, as it adds flavour and volume to food.
21:36Recently, however, corn syrup has been subject to intense scrutiny,
21:40as some scientists continue to link its consumption with a gradually increasing abnormal weight gain among adults and children.
21:51Another major reason for corn's substantial rise lies in the production of fuel, particularly industrial fuel.
21:59Once again, new technological discoveries have given birth to ethanol fuel, produced in part using corn and sugarcane yeast.
22:08In the US, the world's biggest corn producer, over 345 million metric tons is produced annually.
22:16Approximately 40% of that is used in the production of ethanol-based fuel, for use in customised automobiles, for
22:23instance.
22:24Therefore, based on these two major factors, although not limited to them,
22:29around the world, corn has become a commonly used and invaluable commodity.
22:34Known as a soft commodity, due to the fact it's grown as opposed to mined,
22:39it is traded via corn exchanges in countries all over the world.
22:42It's typically traded either electronically, or using the open outcry method,
22:48where traders use a combination of verbal bids and hand signals to buy and sell.
22:54Due to corn's significant consumption globally, it is highly sensitive to price fluctuations too,
23:00particularly when dealing with supply and demand.
23:03One major factor to affect prices lies in the weather.
23:07In the summer of 2012, the US experienced its worst drought in half a century.
23:13It meant corn harvests appeared earlier than usual,
23:16and were considerably smaller in yield when compared to previous years.
23:21As a result of this drought, the price of corn rocketed to a record high of $8.20 per bushel.
23:27It affected livestock production, and sent food costs spiralling,
23:33and shows that Mother Nature will play a major role in the price of corn.
23:38Another factor for price fluctuation lies in corn's resistance to disease and pests.
23:43Currently, over half the planted corn worldwide has been genetically modified.
23:48That is to say, genetically engineered to withstand as many hazardous conditions as possible.
23:53This modification boosts the typical resilience and yield of a harvest.
23:59With greater volume, comes cheaper prices.
24:02Finally, subsidies, be they private or government backed,
24:06has a powerful impact on the price of corn.
24:09The US currently spends over $14 billion per year on farming subsidies,
24:14most of it channeled towards corn.
24:16This provides farmers with a type of domestic aid during a poor harvest,
24:21and acts as a safety net that can drastically increase corn's potential volume,
24:26and yield over subsequent seasons.
24:29Corn is an incredibly versatile grain, and a staple commodity.
24:33It feeds livestock and humans,
24:36and may one day act as a widely used and viable alternative to petrol in cars.
24:41However, a warming planet and miscalculations in demand
24:44are the biggest threats when it comes to both consumption and marketplace value.
24:49But for now, corn remains king of the grains,
24:53and has planted itself firmly in society as one of the world's most sought-after commodities.
25:02Trade creates the wealth necessary for economic development,
25:06and creation of employment opportunities,
25:09so that, in developing nations or industrialised nations,
25:12commodities remain an integral component of global trading.
25:16.
Comments