Commodity Market – A commodity market means a marketplace for buying, selling, and trading raw materials or primary products.
The major U.S. commodity exchanges consist of ICE Futures U.S. and the CME Group, which consist of four major exchanges: the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, and the Commodity Exchange, and many more.
Certain commodities, such as precious metals, have been thought of to be a good hedge against inflation, and a broad set of commodities as an alternative asset class can assist in diversifying a portfolio. Because the prices of commodities tend to move in opposition to stocks, some investors also depends on commodities during periods of market volatility.
Commodities markets give permission to producers and consumers of commodity products to gain access to them in a centralized and liquid marketplace. These market parts can also use commodities derivatives to hedge future consumption. Speculators, investors, and arbitrageurs also play an important role in these markets.
Generally speaking, commodities trade in two types of market which are spot markets or derivatives markets. Spot markets are also knows as “physical markets” or “cash markets” where buyers and sellers exchange physical commodities for immediate delivery.
Examples of Commodities Markets-
The major exchanges in the U.S., which include commodities, are domiciled in Chicago and New York with several exchanges in other locations within the country. The Chicago Board of Trade (CBOT) was established in Chicago in 1848. Commodities traded on the CBOT incorporate corn, gold, silver, soybeans, wheat, oats, rice, and ethanol.
The Chicago Mercantile Exchange (CME) trades commodities such as milk, butter, feeder cattle, cattle, pork bellies, and lean hogs.