Commodities in the stock market refer to material commodities that can enter the circulation area, but are not retail links, have commodity attributes and are traded in large quantities for industrial and agricultural production and consumption.
Commodities can be divided into three major categories: the first category is agricultural products; the second category is metals; and the third category is energy and chemicals. Publicly traded companies with these businesses are called commodity stocks.
Bulk commodities refer to material commodities that can enter the circulation field but are not retail links. They have commodity attributes and are used for industrial and agricultural production and consumption in large quantities. In the financial investment market, bulk commodities refer to commodities that are homogeneous, tradable, and widely used as basic industrial raw materials, such as crude oil, nonferrous metals, steel, agricultural products, iron ore, coal, etc. It includes 3 categories, namely energy commodities, basic raw materials and agricultural and sideline products.
Features
Price fluctuates greatly. Only when commodity prices fluctuate greatly, traders who intend to avoid price risks need to use forward prices to determine the price first. For example, some commodities implement monopoly prices or planned prices, and the prices remain basically unchanged. There is no need for commodity operators to use futures trading to avoid price risks or lock in costs.
Supply and demand are large. The functioning of the futures market is predicated on extensive participation in transactions by both supply and demand parties of commodities. Only commodities with large spot supply and demand can fully compete on a large scale and form authoritative prices.
Easy to grade and standardize. Futures contracts stipulate the quality standards of the delivered commodities in advance. Therefore, futures varieties must be commodities of stable quality, otherwise, it will be difficult to standardize.
Easy to store and transport. Commodity futures are generally commodities for forward delivery, which requires these commodities to be easy to store, not easy to deteriorate, and easy to transport to ensure the smooth progress of physical delivery of futures.
Futures
Shanghai futures: copper, aluminum, zinc, natural rubber, fuel oil, gold; Dalian futures: soybeans, soybean meal, corn, soybean oil, palm oil, plastics, coke. Zhengzhou Futures: hard wheat, strong gluten wheat, sugar, cotton, PTA, rapeseed oil, methanol.
Bulk commodities can be designed to be traded as futures and options as financial instruments, which can better realize price discovery and avoid price risks. Since bulk commodities are mostly industrial bases and are at the most upstream, changes in futures and spot prices that reflect their supply and demand conditions will directly affect the entire economic system.
For example, rising copper prices will increase production costs in the electronics, construction and power industries, while rising oil prices will lead to higher prices for chemical products and drive up the price and supply of other energy sources such as coal and alternative energy sources. Investors, especially those in investment-related industries, should pay close attention to the supply, demand and price changes of commodities.