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The value of Commodity Reports

Information is the key to all good decision making. Companies need to have the best information available at all times to help you make better decisions.

The commodities market has a profound influence on the price of a myriad of products. It affects the stability, viability and most importantly profitability of a staggering number of companies worldwide.

Commodity markets affect all businesses

The commodity market begins with just that—a commodity. It then becomes part of a much larger jigsaw, where the availability and price of the original product, affects everything from manufacturing companies, right down to the consumer.

Let’s use oil as an example. The political stability of the Gulf may not be uppermost in the thoughts of the management in a plastic manufacturing plant—but it should. It is one of the primary drivers of price fluctuation that will eventually effect the final selling price of the product to market. therefore, it effects the company’s ability to compete in that market.

Factors affecting the commodity market

The commodity market consists of various groupings. It is worth taking a quick look at the various elements.

The wheat/coffee/sugar farmer, for example, is at the mercy of the weather from the moment the crop is in the ground. As well as this, they are operating in a market where over/under supply is an unknown, year to year. To minimise their risk, they can hedge against the eventual price paid by setting a predetermined value on their crop irrespective of the prevailing markets. It is in this volatile arena that the commodity trader operates. They will wager on the eventual price paid in the same fashion as currency traders bet on national currency fluctuations, therefore also affecting the final price for the consumer.

Larger Market Forces: The price of oil

Larger market forces greatly effect on the price paid for any given commodity. The oil market provides a valuable insight into the global influences that can affect both supply and demand. With concerns of an oversupply causing prices to drop, OPEC stepped in to create an output agreement among its members.  Despite this, output is still high, largely due to increased output in the US.

With such major players in the market affecting oil prices, it becomes even more important for the smaller manufacturer to be aware of any long-term implications affected by legislative/political policy and our old favourite –the law of unintended consequences.

Commodity reports use leading trusted data

It would be next to impossible for any single company to really drill down into so many diverse, and often conflicting information sources. It is in this technical space that the commodity report comes into its’ own. By creating a fact-based report with the latest information from government agencies, respected members of academia, and many other sources, it provides companies with an overarching analysis of the commodity market and the likely direction it may take.

What industry is most affected by the Commodity market?

In the final analysis, it is the manufacturer that is most at risk, and therefore this sector of the market that needs to be most aware of the prevailing influences at play. This is where commodity reporting is at its best. By considering a wide range of statistical analysis and refining it into an informative and quickly read document it affords the end user unrivaled access to valuable information that can use in long-term buying strategies and forewarn companies in a volatile and ever changing landscape.

Sourcing raw data is a painstaking task, intricate collation and validation is necessary to ensure that the information included in a commodity report is accurate and relevant. Some information may be region or country specific so it important that the data sources used, match the markets from where the commodities are sourced. Accurate and reliable data for monthly commodity prices provides trends which can be tracked and monitored. Historical trend graphs demonstrate at a glance how a commodity has performed in the past, showing seasonal variations along with the dips and troughs of supply and demand forces.

Why are commodity reports important?

A commodity report goes beyond just presenting graphed data, to indicate key movements in the commodity markets and giving insightful information behind these movements. Political, environmental and economical background information is presented to explain the shift in price over time above and below the expected seasonal deviation.

No company can really be without up to date information on current market trends and global monetary/political situations, as to do so would be to operate in a self-imposed vacuum ignoring the fact that all commodities are interconnected and the domino effect is alive and well. By examining longer term underlying trends the commodity report brings a level of expectancy to a very volatile arena. Every area of production from grower to manufacturer distributor and consumer can only benefit from a more in-depth knowledge of the process and the prevailing influences.

With knowledge comes power and ability to manage risk in a more nuanced and professional manner which can only be of benefit to all players in the market.

iDDea provides commodity reports each month from leading data sources. If you’d like to subscribe email us.

 

 

 

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