1.4 The Commodity Market (Where real assets are traded…)

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來自 The University of Melbourne 的課程

全球资本市场的作用

412 個評分

The University of Melbourne

全球资本市场的作用

412 個評分

課程 2（共 5 門，Specialization 公司财务概要）

In this course, participants will learn about how different markets around the world can interact to create value for, and effectively manage the risk of, corporations and their stakeholders. This is part of a Specialization in corporate finance created in partnership between the University of Melbourne and Bank of New York Mellon (BNY Mellon).

從本節課中

An Introduction to Key Global Markets

We begin this course by exploring the importance of the financial market environment on corporate financial decision-making. Using the example of Kellogg’s, we cover the key financial markets that are reflected in the company’s financial statements. We briefly introduce their key functions and features in providing flow of funds, price discovery and risk management.

1.0 Welcome and Introduction (Getting organized)7:17

1.1 The Equity Market (Where the company owners meet…)8:25

1.2 The Debt market (Where the company lenders meet…)6:35

1.3 The Foreign Exchange Market (No company is an island…)9:04

1.4 The Commodity Market (Where real assets are traded…)6:48

1.5 The Derivatives Market (Where business risks can be traded…)7:24

與講師見面

Paul Kofman
Dean, Faculty of Business and Economics
Sidney Myer Chair of Commerce
Sean Pinder
Associate Professor
Faculty of Business and Economics

Having discussed the markets for financial assets,

let's now turn our attention to a market for real assets, the commodity markets.

Companies, like our Kellogg's,

go to markets to source their primary commodities, their raw materials.

Kellogg's would be comparing the prices of grains inputs into its cereals.

So the graph here would tell Kellogg's what

the price performance of wheat has been over the past 15 odd years

as compared to the price developments in corn.

And it could make its business decisions of sourcing

the relevant raw materials accordingly.

Primary commodities are, in fact, traded globally.

They're traded globally in wholesale over-the-counter markets, similar to

the foreign exchange markets, similar to the debt markets as a trading platform.

Many very large corporations

would source their raw materials directly from large producers.

But many others would source them through a set of intermediaries.

And the intermediaries of relevance for

Kellogg's could be the major grain merchants,

or it could be a set of commodity brokers.

Markets in primary commodities like agricultural commodities, metals,

energy, assets are somewhat different from the markets for

financial assets, the capital markets that we've discussed so far.

So for example at any particular point in time, there might, in fact,

be five maybe even ten different prices for arabica coffee.

Now how can that be?

How can it be that there are so many different prices?

Aren't markets meant to eliminate that price dispersion and

deliver a single point of truth in price discovery?

Well, clearly that doesn't apply here, so why would that be the case?

It turns out that it is, in fact, very, very difficult to obtain

what we call a comprehensive transparent market price signal.

It would require standardization of quality,

purity, delivery location, the geographical location

where the coffee is coming from, transportation costs involved, etc.

You might want to take off that list and see whether it has any relevance

in the debt markets or the foreign exchange markets or equity markets even.

The answer would be no.

It doesn't apply in that setting but it does for commodities.

So the example here in the graph is the wheat price in US dollars per metric ton

and then we see the raft of information provided there which makes it

very specific about what particular commodity we're talking about.

Number one, hard red winter, ordinary protein, free on-board, Gulf of Mexico.

A lot of information is required to pinpoint

the relevance of this particular price for a particular commodity.

Beyond aggregating for a single commodity, the wheat price,

the market here also aggregates across different commodities.

So we could describe the commodity market as a market characterized

by the commodity price index that you see on the screen

which is provided by the US Bureau of Labor Statistics.

Similar to the price indices we've seen for equities where the Dow Jones Index

presents an average price performance of about 30 industrial stocks.

The same has occurred here for a commodity price index.

So the commodity price index is a basket

of commodities appropriately translated into an index.

So why is the US Bureau of Labor Statistics providing this

particular index?

Well, they use it as you can see in the shaded area

as in indicator to signal changing business activities.

So the purchases and the price developments in primary commodities

is typically a leading indicator of what will happen next in the manufacturing

of those prized primary commodities.

So it gives an indication of changing economic conditions ahead of time.

If corporations decide to slow down their rate of production,

they would use less primary commodities, less demand for

those primary commodities would mean a lower price for these primary commodities.

And that would be reflected in the commodity price index.

So some of the issues worth considering for commodity markets including liquidity.

Liquidity can truly be a problem.

There are significant supply variations for

many agricultural commodities, for example.

It's seasonally defined.

But there are also demand variations.

There are peak periods in the use of certain primary commodities, certain raw

materials, and that will have a significant impact on price developments.

We've already hinted at the fact that transparency might be less than perfect.

There's no such thing as a single arabica coffee price.

In addition to that, many transaction happen, in fact, off-market. Bilateral

negotiations between large corporations and large primary producers.

The nature of those long term contracts negotiated by the large corporations

would disadvantage many smaller buyers and sellers in this market.

That suggests that this market is often not fully competitive and

that will have its impact on price discovery and

the fairness of the prices to every trader involved.

So what are the key markets for trading commodities?

Again, the same culprits as before,

New York, Chicago, London, the traditional commodity centers.

But you have to keep in mind that because of this dispersion in quality and

location, in fact commodity markets are quite geographically dispersed.

Nonetheless, more and more commodities are nowadays listed on automated

trading platforms and the information thereby gets much more efficiently pooled

overcoming many of those problems that we've just discussed.

Commodity trading is in fact becoming evermore a global marketplace,

making life that much easier for

the corporation's processing commodities into manufactured goods.

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