Commodity markets in international trade

Abstract

The project was examined the nature of commodity markets and their history and development leading to their current structure. The economics and theory of the functioning of Futures market and their economic impact have been studied. The effects of exchange rates, demand, supply and their fluctuations have been studied and the sensitivity of the futures market to these have been noted- The experience of Indian companies - both public and private in futures market have been studied both as illustrative examples and to get a feel of the real life mechanics of the commodity future market. This in especially important to recognize how the Indian organizations are functioning in the international Commodity trade. The domestic futures market has also been studied with a view to understanding the operation of force! that affect the international market on a smaller scale. It is noted that the forces and economic theory that are relevant to the operation are essentially the same. The report also examines the importance end use of futures market: as a management tool. The type of firms: "EMT would be affected by futures markets dspen6.in=; upon their connection with commodities having certain characteristics have been identified. The individual manager has to decide what level of risk due to price fluctuations is acceptable to the firm. Some guidelines for setting down broad policies have been suggested by looking at different scenarios. However, the decisions in operating the futures market have to be largely judgmental and therefore the need fore loose organization structure is emphasized, in order to use futures market as e-management tool. The authors of the report were unable to come up with e model for taking optimal purchase decisions in the commodities market due to the refusal of concerned to divulge sensitive data, and the conviction of the executives of these companies that such a model was not workable. It concludes with an analysis of modeling approaches currently available and suggestions for future improvement;